Prem Sikka, Labour Peer and Emeritus Professor at the University of Essex and the University of Sheffield
EXECUTIVE SUMMARY
British people are facing an existential threat to their lives and living standards. The crisis is given visibility by escalating energy prices, but has been incubating since the late 1970s. It has been nurtured by neoliberalism and the state-corporations nexus, which has systematically sought to increase capital’s share of gross domestic product (GDP).
British people are facing an existential threat to their lives and living standards. The crisis is given visibility by escalating energy prices, but has been incubating since the late 1970s. It has been nurtured by neoliberalism and the state-corporations nexus, which has systematically sought to increase capital’s share of gross domestic product (GDP).
The masses have been systematically impoverished as successive governments have sought to weaken trade unions, employment and welfare rights and pushed zero-hour contracts, fire and rehire policies to reduce workers’ share of gross domestic product. Poverty and inequalities have deepened, creating a class excluded from social consumption, queuing at food banks and forced to decide between heating and eating. The biggest beneficiaries from this have been footloose corporations. Their profits have rocketed. Unsurprisingly, millions of Brits are unable to pay energy, food and other bills.
The power of corporations has been further enhanced by state-sponsored privatisation of publicly-owned assets and industries, often at knockdown prices. The energy sector is an example of the state-sponsored private monopolies. In this sector there can be no competition as competing infrastructure consisting of alternative pipelines, electric grids and cables is economically infeasible. Households and businesses have to buy energy. With captive customers, the energy sector has been able to make huge profits. Large parts of these are exported via dividends and other forms of returns, which are not even taxed in the UK.
The regulator, the Office of Gas and Electricity Markets (Ofgem), has been more concerned about pseudo-competition and guaranteeing corporate profits and has failed to protect the interests of consumers. It is inherently conflicted as it simultaneously seeks to protect corporate profits whilst trying to protect customers. Ofgem’s price cap formula is fundamentally flawed as it favours the most inefficient and expensive supplier. Suppliers offering cheaper tariffs are penalised and forced to compensate the losing suppliers.
The problem of high energy prices cannot be resolved by privatisation or neoliberal economics where wealth gushes upwards. This paper puts forward policies for equitable distribution of income and wealth to reduce poverty and economic inequalities, the root cause of the daily crisis faced by millions of people. It recommends progressive taxation and democratisation of corporations, so that they serve the interests of communities and people rather than just shareholders and executives. It recommends that essential industries, such as energy, be brought into public ownership. It shows that there is very little cost associated with bringing energy, and other essential industries, into public ownership.
The power of corporations has been further enhanced by state-sponsored privatisation of publicly-owned assets and industries, often at knockdown prices. The energy sector is an example of the state-sponsored private monopolies. In this sector there can be no competition as competing infrastructure consisting of alternative pipelines, electric grids and cables is economically infeasible. Households and businesses have to buy energy. With captive customers, the energy sector has been able to make huge profits. Large parts of these are exported via dividends and other forms of returns, which are not even taxed in the UK.
The regulator, the Office of Gas and Electricity Markets (Ofgem), has been more concerned about pseudo-competition and guaranteeing corporate profits and has failed to protect the interests of consumers. It is inherently conflicted as it simultaneously seeks to protect corporate profits whilst trying to protect customers. Ofgem’s price cap formula is fundamentally flawed as it favours the most inefficient and expensive supplier. Suppliers offering cheaper tariffs are penalised and forced to compensate the losing suppliers.
The problem of high energy prices cannot be resolved by privatisation or neoliberal economics where wealth gushes upwards. This paper puts forward policies for equitable distribution of income and wealth to reduce poverty and economic inequalities, the root cause of the daily crisis faced by millions of people. It recommends progressive taxation and democratisation of corporations, so that they serve the interests of communities and people rather than just shareholders and executives. It recommends that essential industries, such as energy, be brought into public ownership. It shows that there is very little cost associated with bringing energy, and other essential industries, into public ownership.
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