The Tory rail privatisation disaster

When the Tories were introducing their ideologically driven and hopelessly botched plan to privatise the UK rail network the Tory Transport Secretary John MacGregor claimed that passengers would benefit from reduced fares.

Anyone who understood the basics of monopolies (captive markets) knew that MacGregor's promises were fantastical nonsense. Once a monopoly service is handed to a private profit-seeking entity, prices are certain to rise because there's no price competition in a captive market.

Two decades after rail privatisation the average train fare has increased by 117% (24% adjusted for inflation). On some journeys fares have increased by well over 200%.

Aside from the direct hit to passengers' wallets, there's also the fact that the private rail operators are being showered with £billions in direct and indirect taxpayer subsidies.

Annual direct subsidies to the private rail franchises far exceed the total cost of running the entire UK rail network back when it was run as a not-for-profit public service!

Aside from the direct subsidies there is also the issue of the indirect subsidy that occurs because the publicly owned rail infrastructure company (Network Rail) allows the private rail franchises to use the tracks at significantly below the actual cost of maintaining them.

Hiring out the tracks at way below market value in order to secure the profitability of the private train operators has meant that Network Rail has built up a vast debt mountain of £41 billion.

This is about as clear an example as possible of the Tory ideology of privatising the profits and nationalising the debts as it's possible to see.

Aside from costing far more in direct and indirect subsidies, the privatised rail franchises do far less than British Rail with all of that extra money.

Before privatisation British Rail designed and developed new trains, including many that are still in service today generating huge profits for their private operators. Privatisation of the UK rail network put a swift end to Britain being a world-leader in train building.

Immediately after privatisation the private franchises were so intent on reaping as much profit as possible out of the old taxpayer-funded rolling stock that there wasn't a single new train order for 1,064 days, causing the absolute annihilation of the UK train building industry.

These days the UK buys most of its new trains from Germany, Japan, China and even Italy, which is an absolutely shameful state of affairs for the country that invented the railway and was a world leader in trainbuilding well into the 1980s.

The abject failure of rail privatisation is perhaps the most glaring example of all amongst a litany of other woeful Tory privatisation scams, yet the Tories will never undo their mistake because they're ideologically opposed to British infrastructure being owned by the British public and operated on their behalf.

In fact the Tories have such a strong ideological opposition to British infrastructure and services being owned by the British people that they would demonstrably prefer our rail infrastructure to be owned and operated by foreign states like Germany, France, Netherlands, Hong Kong and Singapore. 

Just a few decades ago a government would be considered shockingly treasonous for promoting a policy of prohibiting the British from owning our own rail network so that it can be used as a cash cow by foreign states. 

But these days, thanks to the Tory rail privatisation scam, it's not just a crackpot policy that would have been shouted down as anti-British lunacy in the past, it's the actual reality!

Tory rail privatisation has been an absolute failure for everyone apart from the profiteering rail franchises and train leasing companies. Passengers have suffered massive ticket price inflation and ever more over-crowded and unsafe conditions; the taxpayer continues to pay far more in subsidies than the total cost of running British Rail in the past; Network Rail is sitting on a £41 billion debt mountain; the UK train building industry has been annihilated; and railway staff have suffered over two decades of declining wages and worsening working conditions.

The two political parties that deserve credit for promoting the extremely popular policy of rail renationalisation are Jeremy Corbyn's Labour Party and the Green Party (who supported rail renationalisation back when the New Labour mob were still pushing disgusting neoliberalism-lite gruel on the public under Miliband and Balls).

Let's hope that someone with some sense actually moves to sort out this festering Tory blight on our nation soon.

 Another Angry Voice  is a "Pay As You Feel" website. You can have access to all of my work for free, or you can choose to make a small donation to help me keep writing. The choice is entirely yours.

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The treacherous hypocrisy of the anti-renationalisation crowd

When people tell you that the UK should not run its own rail network and that the system is fine as it is now, you should realise that you're conversing with a traitor who hates Britain.

It seems harsh, but that's really the only way of seeing it.

If they argue against rail renationalisation and in favour of the way the system is set up now, you're clearly dealing with someone who thinks it's fine for foreign governments to operate chunks of our rail network and extract the taxpayer subsidised profits overseas to fund rail infrastructure in their own countries, as is the case now ... but who hates the idea of the UK running it's own railways and reinvesting any profits back into our own rail system.

You're dealing with someone who loves foreign governments running our railways and shipping their taxpayer subsidiesed profitis overseas to invest in their own rail networks, but who thinks that it's some kind of unaffordable communist madness for the UK to run its own rail network and reinvest the profits in actually improving our own services and infrastructure.

Here are a few facts

• Since the Tories privatised the rail network in 1994 fares have increased by an average of 114% and the amount the taxpayer hands out in subsidies is double what it cost to run the entire system before privatisation.

• Three quarters of the rail franchises in the UK are now fully or partly owned by foreign governments through their state-owned rail companies!

• The Netherlands State Railway (Abellio) operates a network of rail franchises in the UK that is two and a half times the size of the entire Dutch rail system!

• Between 2012 and 2014 foreign state owned rail companies sucked over £1 billion out of the UK rail network, none of which would have existed without the vast taxpayer subsidies that get pumped into the UK rail network.

• When the private operators of the East Coast Mainline bailed out of their contract early because the line was supposedly so unprofitable, a state owned operating company was set up to take over. This soon became the most popular and most profitable franchise on the whole network until the Tories hastily re-privatised it.

• The Tory policy on state ownership of our rail network is that the only country that should be banned from bidding to run UK rail franchises is ... the UK!

• Since privatisation in 1994 the UK rail network has become the most expensive in Europe, and it's also one of the least reliable and most overcrowded systems too.

• In March the Tory transport Chris Grayling just handed another vast chunk of the UK rail network to a foreign government, when he handed the South Western franchise to the Hong Kong state railway.

Treachery

So next time you hear someone banging on about how nationalising the railways is such a bonkers idea, ask them why they approve of foreign states running our railways and extracting the profits overseas, but think it's such an awful idea for us to run out own railways and keep the profits here.

Ask them why they think it's acceptable that the system costs twice as much in subsidies now than it cost to run the entire system back in the 1980s

Ask them why they think UK passengers should pay the highest ticket prices in Europe for some of the most overcrowded and unreliable services of all.

Ask them why they think the UK should be the only country that is barred from submitting bids to run chunks of the UK rail network.

You'll soon see them trying to perform absurd mental gymnastics to defend the involvement of foreign states like Germany, The Netherlands, France, Italy, Singapore, China and Hong Kong in running 74% of our rail network, whilst simultaneously trying to make out that the UK should continue to be barred from running our own railways because the state sector is supposedly so "inefficient".

If the state sector is so inefficient, then why on earth do they insist on arguing in favour of a system that is 74% operated by the state sectors of other nations?

Of course they won't like being challenged on their treasonous hard-right economic views and pushed into putting on ridiculous displays of mental contortionism to defend their "keep things as they are now" mentality, but someone needs to stand up to these anti-British bullies who insist on shouting down the idea of rail nationalisation because they want, for whatever crackpot reason, foreign states to continue running it and extracting the profits overseas instead.

 Another Angry Voice  is a "Pay As You Feel" website. You can have access to all of my work for free, or you can choose to make a small donation to help me keep writing. The choice is entirely yours.

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The Tory rail privatisation rip-off

When the Tories were introducing their ideologically driven and hopelessly botched plan to privatise the UK rail network the Tory Transport Secretary John MacGregor claimed that passengers would benefit from reduced fares.

Anyone who understood the basics of monopolies (captive markets) knew that MacGregor's promises were fantastical nonsense. Once a monopoly service is handed to a private profit-seeking entity, prices are certain to rise because there's no price competition in a captive market.

Two decades after rail privatisation the average train fare has increased by 117% (24% adjusted for inflation). On some journeys fares have increased by well over 200%.

Aside from the direct hit to passengers' wallets, there's also the fact that the private rail operators are being showered with £billions in direct and indirect taxpayer subsidies.

Annual direct subsidies to the private rail franchises far exceed the entire cost of running the entire UK rail network back when it was run as a not-for-profit public service.

Aside from the direct subsidies there is also the issue of the indirect subsidy that occurs because the publicly owned rail infrastructure company (Network Rail) allows the private rail franchises to use the tracks at significantly below the actual cost of maintaining them.

Hiring out the tracks at way below market value in order to secure the profitability of the private train operators has meant that Network Rail has built up a vast debt mountain of £41 billion. This is about as clear an example as possible of the Tory ideology of privatising the profits and nationalising the debts.

Aside from costing far more in direct and indirect subsidies, the privatised rail franchises do far less than British Rail with all of the extra money.

Before privatisation British Rail designed and developed new trains, including many that are still in service today generating huge profits for their private operators. Privatisation of the UK rail network put a swift end to Britain being a world-leader in trainbuilding.

Immediately after privatisationthe private franchises were so intent on reaping as much profit as possible out of the old taxpayer-funded rolling stock that there wasn't a single new train order for 1,064 days, causing the annihilation of the UK trainbuilding industry.

These days the UK buys most of its new trains from Germany, Japan, China and even Italy, which is an absolutely shameful state of affairs for the country that invented the railway and was a world leader in trainbuilding well into the 1980s.The abject failure of rail privatisation is perhaps the most glaring example of all amongst a litany of other woeful Tory privatisation scams, yet the Tories will never undo their mistake because they're ideologically opposed to British infrastructure being owned by the British public and operated on their behalf.

In fact the Tories have such a strong ideological opposition to British infrastructure and services being owned by the British people that they would demonstrably prefer our rail infrastructure to be owned and operated by foreign states like Germany, France, Netherlands, Hong Kong and Singapore. 

Just a few decades ago a government would be considered shockingly treasonous for promoting a policy of prohibiting the British from owning our own rail network so that it can be used as a cash cow by foreign states, but these days, thanks to the Tory rail privatisation scam, it's not just their policy, it's the actual reality!

Tory rail privatisation has been an absolute failure for everyone apart from the profiteering rail franchises and train leasing companies. Passengers have suffered massive ticket price inflation and ever more over-crowded and unsafe conditions; the taxpayer continues to pay far more in subsidies than the entire cost of running British Rail; Network Rail is sitting on a £41 billion debt mountain; the UK trainbuilding industry has been annihilated; and railway staff have suffered declining wages and worsening working conditions.

The two political parties that deserve credit for promoting the extremely popular policy of rail renationalisation are Jeremy Corbyn's Labour Party and the Green Party (who supported rail renationalisation back when the New Labour mob were still pushing neoliberalism-lite under Miliband and Balls).

 Another Angry Voice  is a "Pay As You Feel" website. You can have access to all of my work for free, or you can choose to make a small donation to help me keep writing. The choice is entirely yours.

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Brexit is a shambles and the political class are floundering

The political class have had ten weeks to come up with some kind of plan to deal with the vote for Brexit, but the woeful state of the drivel most of them have come up with so far has actually left us with the situation where the confusion over what Brexit is actually going to mean for the British economy is actually growing rather than diminishing!

No plan

The Brexiteers who goaded 37% of the public into voting for Brexit clearly had no plan whatever about what to do if they got their way. Nigel Farage and Boris Johnson made that absolutely clear by the way they immediately scarpered after the event.

This total lack of anything even remotely resembling a plan of action that the political class could be held to in the result of a Brexit vote was the main objection of anyone who considered the subject with any degree of seriousness. Had the pro-Brexit camp actually presented their plan we could have considered it on its merits. The fact that they just had a random jumble of slogans, utopian fantasies and false promises instead of an actual strategy for what comes next meant there really was nothing serious to consider.

Even worse than the Brexiteers having no plan for Brexit was the fact that David Cameron's government had no contingency plan whatever in case their gamble with the entire future of the UK economy backfired. Cameron's choice to risk the future of the country for a bit of short-term party political advantage at the 2015 General Election was bad enough, but having no plan in case it backfired and then just resigning and washing his hands of the whole mess he created was truly abysmal stuff, even judged against his own utterly woeful track record as Prime Minister.

Making it up as they go along 

David Davis' long-awaited Brexit speech was truly abysmal stuff. Flanked by the other merry Brexiteers Boris Johnson and Liam Fox, Davis' wasted fifteen minutes with a hopeless display of unfocused waffling. In the process he managed to clarify very little other that the fact that even after ten weeks these charlatans have got no coherent strategy for removing the UK from the European Union.

One of the only concrete Brexit policies that Davies actually bothered to detail in his rambling speech was the plan to retain of the EU's system of landowner subsidies, under which wealthy landowners are showered with taxpayers' cash simply for owning vast tracts of land, with no obligation to actually cultivate anything whatever in return for their handouts.

In guaranteeing the continuance of these farcical landowner handouts, Davies made it absolutely clear that the Tories are determined to keep one of the very worst and most iniquitous elements of EU membership simply because it benefits the land monopolist class who bankroll the Tory party (and make up a significant proportion of their MPs too).

The next day Davis had to be slapped down by the Prime Minister's office because his prognosis that the UK retaining membership of the single market would be "very improbable" is not government policy.

It's clear that one hand doesn't even know what the other hand is doing. An extraordinary mess!

Davis may have been speaking above his station when he publicly poo-pooed the idea of the UK staying in the single market, but what the actual government policy is remains entirely unclear, which brings us to Theresa May.

Theresa May

It seemed unlikely that anyone could put on a less reassuring performance than David Davis (who guaranteed that taxpayer funded handouts to his landowner Tory mates but had not a single word of reassurance for vital sectors of the economy like manufacturing, retail, science, education, energy, transport or health) but Theresa May managed to trump him the next day with an utterly vapid performance at Prime Minister's Questions.

After trying to score points against Jeremy Corbyn by giving a massive and unprecedented boost of free publicity to an extremely distasteful hard-right Twitter ranter by name-checking him on the public record, she then repeatedly and egregiously evaded a perfectly clear, sensible and simple question from the SNP's Angus Robertson, about whether Theresa May wants the UK to stay in the European Single Market or leave.

All Theresa May could come up with was a load of flustered and patronising waffle while the Tory benches tried to save her embarrassment by trying to drown out Robertson's questions with their now customary barrages of hooting, jeering, braying and assorted animal noises.

It's absolutely inconceivable that Theresa May will be able to keep on stalling for years on end about whether the UK is going to seek to retain membership of the single market with vacuous platitudes like "Brexit means Brexit", but that's all she's been doing for 10 weeks already, so maybe endless stalling is actually her plan? Who knows?

It's hardly a rabidly left-wing Trotskyite position to say that vital sectors of the UK economy like manufacturing, retail and services will suffer if this uncertainty continues. If the UK government is not going to seek membership of the single market, UK businesses need to know about it, and they need to know about it soon so they can come up with business plans to try to mitigate the economic fallout.

The "Norwegian option" or "Hard Brexit"

Assuming that the stalling is one day going to come to an end and that Brexit is eventually going to go ahead, a lot of people think that "the Norwegian option" is the best of a bad situation. 

The problem is that single market access comes with certain stipulations, including the free movement of labour within the single market zone. It's inconceivable that the EU would allow the UK to keep access to the single market without us agreeing to the free movement of labour (because it would clearly incentivise a chaotic disintegration of the EU as other states quit in the hope of their own cherry-picked sweetheart deals).

Keeping single market access and scrapping the free movement of labour is a complete fantasy. You couldn't really get a purer political example of people wanting to have their cake and eat it. When Theresa May says she wants to scrap free movement but refuses to say that she wants to quit the single market, she's blatantly playing utopian fantasy land politics and taking anyone she expects to believe it for an idiot.

Keeping the single market and not scrapping the free movement of people from the EU into the UK would cause an apoplectic storm of protest from the huge xenophobic-Brexiter contingent. The very reason these people voted out of the EU was to get rid of the pesky foreigners. Any deal that involved keeping the free movement of labour would have them wailing and shrieking even louder than they were before, or perhaps even descending into the violent lynch mob mentality eluded to by Nigel Farage and openly promoted by the leaders of Britain First.

That just leaves "Hard Brexit" which would have severe economic consequences for huge numbers of businesses and jobs. Anyone rooting for Hard Brexit whilst working for a Japanese car company in Sunderland (where a majority of people actually voted for Brexit!) really doesn't know their arse from their elbow. They'd actually be rooting for the endangerment of their own jobs and livelihoods because they've swallowed some Brexit fairy tale about "taking back control"!

Jeremy Corbyn

Lot's of people see me as completely biased in favour of Jeremy Corbyn because I generally swim against the tide of savagely anti-Corbyn propaganda that is passed off as news these days, but I'm not. Nobody is beyond criticism.

Corbyn has outlined a stance that the UK should try to negotiate a settlement that keeps access to the single market but frees us from the EU obligations that bar the UK state from intervening to rescue our industries* and that force us to keep privatising public property and services.

These toxic hard-right economic rules are one of my biggest criticisms of the EU, so I understand why Jeremy Corbyn would want them scrapped, but the problem with this stance is that it's pretty much as unrealistic as the single market + no free labour pipe dream that Theresa May keeps pandering to. It's unrealistic because it's against the EU's own interests to allow departing nations to cherry-pick the best bit and scrap all the absolute crap that comes along with it. If they allow that, everyone would want to leave.

The only way that the UK could have stood a chance of scrapping the hard-right pro-privatisation, anti-interventionist neoliberal dogma at the core of the EU would have been to stay in and try to form a pan-European left-wing alliance demanding reform for the whole of the EU. Pleading for a spectacularly unlikely special deal just for the UK at the moment we strop out of the door is an utterly futile strategy.

A second referendum

If you think Jeremy Corbyn's policy is silly, Owen Smith's is even worse. A second referendum on whatever settlement the Tories eventually cobble together could only have negative outcomes.

Either some 37% of the public actually vote in favour of it and give the Tories an actual democratic mandate for the hard-right lunacy they're bound to come up with to please their donors (bankers, the landed gentry, corporate fat cats, tax-dodgers and private health profiteers), or the public vote against it causing years more of damaging economic chaos and uncertainty as the country descends into furious bickering about which referendum outcome is the more legitimate as we're left neither fully in, nor fully out of the EU with the clock ticking towards us being ejected anyway at the end of the two year Article 50 negotiation period.

It's telling how bad the situation is that this state of chaos and uncertainty is actually considered by some people to be the best case scenario!

Conclusion

The main reason I objected to a haphazard abandonment of the EU with no clear strategy for what comes next was not some misguided love of the EU**, it was an understanding of the near inevitability of such a vote resulting in a paralysing mess with a savagely right-wing bunch of Tories intent on running the show for the benefit of their financial backers.

It's really hard to say who is coming out of this the worst. David Cameron for gambling the whole future of the UK and losing; Brexiteers like Boris, Farage, Gove and IDS who were so full of false promises and utopian fantasies before the vote but clearly still have no plan ten weeks after it; the appalling Brexiter ranters who keep telling everyone who tries to discuss this mess to "shut up and get over it, you lost" as if the referendum was some kind of sodding football match; the naive opportunists who believe in Theresa May's cake of access to the single market without paying the price of it with free movement of labour; Jeremy Corbyn who now apparently thinks it's possible to ditch all of the hard-right economic dogma that comes with EU membership but keep access to the single market; Owen Smith and various others in the political establishment who are pinning their hopes on a second referendum to undo the result of the first referendum and further draw out this damaging uncertainty, or the 37% of the public who voted to dump our country into such a chaotic and unstable position under the delusion that it's even possible to "take back control" without anything even remotely resembling a plan of action for how that was to be done.

 Another Angry Voice  is a "Pay As You Feel" website. You can have access to all of my work for free, or you can choose to make a small donation to help me keep writing. The choice is entirely yours.

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* =  Apart from the banks of course, the EU turned a big blind eye to the £1.5 trillion in bailouts, subsidies and financial support we handed to them back when the global economy was paralysed in a huge insolvency crisis caused by their own reckless gambling.

** = I'm confident that I've written far more critiques of the EU than 99% of Brexit voters. Take this, or this, or this as examples.

The Tory Brexit squad just announced protecting landowner subsidies as an overriding Brexit priority!

Ten weeks after Brexit Theresa May's Brexit minister David Davis finally gave a speech to parliament to give details on his plan of action. His speech was widely derided as 15 minutes of pointless waffle because it contained far more sound bites, platitudes and vague aspirations than anything resembling a coherent strategy for leaving the EU without causing significant damage to the UK economy.

Jobs for the boys

His speech did contain a few interesting nuggets of information. One of them was that they have already built up an impressive 300 strong "jobs for the boys" force. It's not entirely certain what these hundreds of people have been doing all summer given the paucity of David Davies' speech, but I'm sure these wonderful unelected technocrats will do a great job of freeing us from the tyranny of the EU's evil army of unelected technocrats.

The austerity U-turn

When it comes to actual policy there really wasn't much to go on, but in the part where he spoke about maintaining economic stability there were a couple of interesting things. One of them is that the Tory Brexit squad have secured an agreement from the new chancellor Philip Hammond that structural and investment fund projects signed before Autumn statement would continue to be funded by the UK treasury after Brexit eventually goes ahead.

This is interesting because it's a 180° U-turn on the previous Tory position that austerity creates economic stability. For the last six years they endlessly chanted George Osborne's ridiculous austerity mantra that they have to ruthlessly slash spending on stuff like infrastructure projects, local government, emergency services and public sector wages in order to achieve economic stability. Now Davis is saying the precise opposite, that in order to achieve stability it's vital to not slash funding.

Whichever way you look at it it's an admission that they're wrong. Either Davis was wrong to seek assurances that agreed structural fund projects wouldn't be axed, or he's right that austerity at a time of economic instability is harmful (he is), which is proof that the last six years of Tory austerity has been needlessly destructive ideologically driven nonsense.

If austerity made any economic sense at all (it doesn't) then Davis and his Tory chums would have gleefully withdrawn funding from the structural fund investments. They didn't do it because they know, as they knew all along, that Osborne's austerity agenda was a socially and economically destructive con job.

Landowner subsidies

One of the only other bits of actual policy announcement in the speech was this bit of nonsense:

"Agriculture is a vital part of the economy, and the government will match the current level of annual payments that the sector receives through the direct payment scheme until 2020, providing certainty."

 Agriculture accounts of just 0.62% of the UK economy. It's obviously an important sector that employs several hundred thousands people, but it's utterly absurd that the Tories give landowners a special policy announcement when other sectors like manufacturing, science, education, health, retail, energy and transport get nothing at all to provide them a measure of "certainty" in the entire speech.

The idea that the EU direct payment scheme represents a subsidy for agriculture is a convenient fiction anyway. These payments are nothing more than taxpayer funded handouts to landowners. They come with no obligation to actually produce agricultural outputs at all. The more land you own the bigger the handout, that's just the way it works. Even landowners who leave their land barren and use it for nothing more than grouse shooting get piles of cash showered on them.

This direct payment scheme is just a way of using the tax system to extract wealth from those who have no large tracts of land to subsidise those who do.

It's just a method of further entrenching inequality by making the "have-nots" subsidise the haves, so no wonder the Tories are so fanatically in favour of it that they prioritise landowner subsidies so brazenly above blatantly much more important stuff like the manufacturing sector (no guarantees that they won't have to pay import and export tariffs on trade with the EU for example).

On the face of it it's extraordinary that the protection of such an unjust landowner subsidisation system is considered something that takes such priority over all of the various other sectors of the economy that didn't warrant any kind of reassurance in David Davis' speech, but then the landowner class are probably the most loyal Tory demographic of all so it's understandable if you look at it from the insular self-interested Tory perspective.

The Tories must have been inundated with calls from their wealthy landowner mates worrying about their taxpayer funded handouts coming to an end, so the Tory Brexit squad have decided to throw them a big juicy bone by promising that they'll still be getting their handouts come what may for the rest of us.

Just look at the fact that Paul Dacre (the editor of the rabidly anti-EU Daily Mail) has claimed an astonishing £460,000 in landowner subsidies for his country estates in Sussex and the Scottish Highlands since 2011. If he hadn't had guarantees from his Tory Brexiter chums that these vast handouts were going to continue, do you really think he would have pushed so strongly for Brexit?

The fact that the Tories see the placation of their land monopolist mates with vast taxpayer handouts as one of their absolutely core priorities in their Brexit "strategy" just goes to show how catastrophically unfit these people are to be negotiating on behalf of the British people.

That they've identified such a ridiculous thing as an overriding priority is compelling evidence that they're going to negotiate the whole thing on behalf of their financial backers (bankers, the landed gentry, corporate fat cats, tax-dodgers and private health corporations) and screw the consequences for the rest of us.

 Another Angry Voice  is a "Pay As You Feel" website. You can have access to all of my work for free, or you can choose to make a small donation to help me keep writing. The choice is entirely yours.

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The fracking = lower energy bills myth

In the wake of the decision by Tory dominated North Yorkshire County Council to approve a fracking licence just a few miles south of the North York Moors national park, the fracking apologists have been out in force to try to defend the decision to completely ignore the massive 131:1 scale of opposition to the plans.

One of the favourite tactics of the fracking apologist is to pretend that there is some kind of correlation between fracking and lower domestic energy bills. In this article I'm going to explain how this argument is not only wrong, but actually completely backwards.

Evidence-free assertions

The claims that the introduction of fracking rigs in the English countryside would bring down domestic energy bills is a classic evidence-free assertion. Fracking enthusiasts just seem to take it as an article of faith that fracking would reduce domestic energy bills in the UK. It's like some kind of unquestionable religious to these people.

If you see anyone making these claims it's a good tactic to ask them to direct you to a peer reviewed scientific study detailing a link between fracking and low energy prices in the UK domestic energy market. They won't be able to do so because no such study exists. They'll just continue repeating the claim on the basis that it's true because they want it to be true.

The UK is not the US

 

Evidence of devastating environmental damage in the US and "cut and run" tactics from unscrupulous US fracking companies who abandon their fracking rigs for the taxpayer to clean up is shrugged off by fracking enthusiasts with the excuse that those things happened in the US and it will all somehow all be different in the UK. However, when it comes to their stories about fracking leading to lower energy prices, they immediately point to the fall in domestic gas prices in the US as if it represents compelling and unquestionable evidence.

It would be easy to dismiss such tactics as "wanting to have their cake and eat it" because it is about as clear an example as possible, but there are some specific reasons that direct comparisons between the US and UK dometic gas markets are desperately misleading.

The early 21st Century fracking boom in the US did lead to a fall in domestic gas prices in the US, but their gas industry was not set up for the mass export/import of gas, so the majority of additional supplies remained within the US market, which created a glut which drove down the price of gas. Not only is the US gas market not set up for mass exportation, there are also laws to disincentivise US firms from exporting energy.

The UK gas industry is very different. The UK gas market is much more interconnected with other countries. If gas production rose in the UK, then domestic prices would be unlikely to fall far because the UK gas market is nowhere near as closed as the US market. In order to significantly reduce domestic gas prices, the UK would need to begin extracting a vast enough quantity of shale gas to impact the entire European gas market. Anyone who thinks that is likely to happen any time soon clearly has no idea whatever about the scale of Russian gas exports to the European market. In 2015 Gazprom (the Russian state gas monopoly) exported 159.4 billion cubic metres of gas to the European market. Third Energy are reluctant to disclose their projections for how much gas they are planning to extract from the KM8 fracking zone, but it's fair to asume that it's going to be an absolutely tiny drop in the ocean compared to the production of the North Sea gas industry, let alone the scale of Russian gas exports to the European market.

Anyone who tries to point to the fall in gas prices in the US as evidence that UK gas prices would also fall is doing nothing but displaying their ignorance of the structural differences between the US and UK energy markets.

 

Ignoring externalities

 

Even if we allow the entirely unproven assertion that fracking will produce lower UK domestic energy bills to stand, there's still the issue of externalities to consider.

If fracking does shave a few pennies off our domestic energy bills, what will be the hidden/unconsidered costs? 

One of the most obvious potential costs that is excluded from the "lower energy bills" claims is the potential cost to the taxpayer of attempting to repair fracking related environmental degridation (in 2013 the Tories exempted the fracking industry from liability insurance). If fracking causes environmental degridation it will either be permanent (an environmental externality), or the taxpayer will have to foot the bill (a taxpayer subsidy that is excluded from the calculation).

Then there's the cost of George Osborne handing the fracking industry a vast tax break in order to make the industry seem even remotely viable. If lower energy prices come at the cost of the taxpayer propping up an unviable industry with huge tax breaks (lost tax revenues), that's clearly an example of giving with one hand and taking away with the other.

Another potential cost is the environmental harm from continued reliance on the burning of fossil fuels to meet our domestic energy demands. Instead of handing vast tax breaks to the fracking industry, surely a more environmentally sustainable strategy would to invest more in things like renewable energy, increased energy efficiency and research into technology like clean fusion reactors?

Another set of costs that has been excluded from the optimistic and unsubstantiated "lower energy bills" claims of the pro-fracking brigade are the costs to the local community. If roads need to be widened to cope with increased traffic, local taxpayers will pay the cost. If property prices fall because of the gigantic fracking rigs in the area, the local community will pay the cost. If the fracking process ends up damaging or destroying the land, the local community will pay the cost.

One of the classic ways of making a bad deal look like a good deal is to cut out all of the extrnalities such as social harms, environmental degredation and economic costs borne by the taxpayer. If these costs are taken into consideration, an even bigger heap of salt needs to be piled on top of unsubstantiated claims that fracking will cause domestic energy bills to fall.

Fracking depends on high energy prices

  

It's already established that claims that fracking will cause UK energy bills to fall are not based on anything remotely resembling peer reviewed scientific studies. It's also clear that such claims are worthless if they involve the exclusion of externalities like social and environmental costs, and economic costs that are carried by the taxpayer. However the most damning criticism of all is that the whole claim is completely backwards. There's no evidence to prove that fracking in the UK would cause energy bills to fall, but if energy bills do fall significantly, then fracking becomes an economically unviable method of energy extraction.

Fracking won't cause lower energy bills because the whole industry is relient upon high energy prices to survive.

The reason fracking relies on high energy prices is that it generates very low rates of Energy Returned on Energy Invested (EROEI) meaning that the margins are an awful lot slimmer tan traditional forms of fossil fuel extraction like oil and natural gas.

The ever improving EROEI ratings for renewable technologies such as solar, wind and wave power also point to difficult times ahead for the fracking industry (unless the Tory government decide to prop fracking up with even more tax breaks and subsidies whilst directly attacking the renewable energy sector).

A look at the way fracking companies across the US "cut and run" when energy prices fell leaving a trail of envirnmental degridation in their wake is direct evidence that the fracking industry is highly dependent upon high energy prices. If falling energy prices caused such chaos in the US fracking business that left Exxon's Chief Executive complaining that they were "losing our shirts" and Total's boss decying extraordinary losses in Texas with claims that Fracking "doesn't work" and that there's "no point in investing where there is no profitability" - then what on earth makes fracking enthusiasts think that the UK fracking business would be exempt from the consequences of the low energy prices they claim that it would cause?

 

Tory energy market price-fixing

Fracking enthusiasts need not be too worried that falling energy prices will derail their beloved industry though, because the Tories have signed up to a vast energy price-fixing deal to bribe the French state into building a nuclear reactor at Hinkley Point C by paying them double the market rate for electricity for 35 years. A crackpot scam to artificially inflate energy prices like the Tory price-fixing deal with the French is a surefire way of making the horribly inefficient shale gas fracking industry look financially viable.

 

Conclusions

 

Environmental destruction in Wyoming after fracking

companies "cut and run" leaving the US taxpayer to

pick up the bill.

Even after the US propped up the shale gas fracking industry with vast tax breaks and woefully inadequate liability insurance rates, the fracking business in the US has imploded due to falling energy prices, leaving an environmental catastrophe in its wake.

The Tories are utterly determined not to learn any lessons from this debacle in the US, deciding to throw vast subsidies and tax breaks around in order to promote fracking in the UK. It's absolutely clear that a large number of Tory politicians have investments in the fracking business, so it's no wonder they're doing everything in their power to promote an industry that is only viable if energy prices remain high.

If deliberately puncturing the growth of the UK sustainable energy sector; signing completely unjustifiable 35 year price-fixing deals with the French to keep UK domestic energy prices as high as posible; giving fracking companies vast tax advantages over other fossil fuel sources, bribing local councils into allowing fracking to go ahead in their areas; exempting fracking companies from covering their own clean-up costs; riding roughshod over the concerns of local communites where fracking is going to be imposed; and spreading completely back-to-front myths about fracking lowering energy prices - is what it takes for the Tories to support the fracking industry, then so be it. David Cameron and his Tory chums have made it absolutely clear that they're "going  all out for shale".

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