The Guardian has noted this morning that:
Labour will announce plans on Thursday to seize back control of Britain's energy network from private shareholders in an effort to fight climate change and end fuel poverty.
Jeremy Corbyn and the shadow business secretary, Rebecca Long-Bailey, are expected to say that heat and electricity should be a human right for all and nationalisation of the network is key to decarbonising the economy.
Under Labour's plan, companies that control the UK's £62bn energy infrastructure — the pipes and cables that supply homes and businesses with gas and electricity — would be taken back into state control soon after a Labour election win.
As I have said in a comment on this blog this morning:
The Green New Deal Group has never discussed nationalisation. I do not see it as in any way a pre-requisite for the GND
And I noted that I agreed with this comment from Paul Hunt on the same post:
Although it is popular, there is no good reason for taking the existing energy network companies in to public ownership. It is true they have been regulated ineptly and have run rings around the regulator, but the answer is effective use of the regulatory powers that exist.
I am not saying I think energy privatisation has been a success. I do not. I am not saying I am opposed to re-nationalisation. I am not. I am saying that what needs to be assessed is priorities.
And in my opinion the question is whether the priority is re-organising ownership of the the industry, at massive cost, with the same energy coming from the same sources as now from the same transmission networks being the result of that process of renationalistaion, or whether a Green New Deal, also requiring some cost to be expended but with different energy from different transmission networks being the result should be the focus instead.
I happen to think that given the climate emergency we face that transforming energy generation, use and transmission are much more important than addressing ownership right now. Addressing ownership will be massively distracting, and costly, and tie down resources in massively bitter recriminations for time to come. There is only so much human energy that can be devoted to the energy sector right now. And transforming what it does is more important than addressing its admin at bthis moment. And anyway, as Paul Hunt notes, regualtion could achieve the goal that renationalisation hopes to achieve just as well.
In other words a Green New Deal does not require energy renationalisation, and however strong its appeal I think it could distract from the Green New Deal right now. And that would be a massive mistake.
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You take on a utility because its being missrun and screwed dry for profit by its private owners: inject vast amounts of public money to upgrade and modernise it into a public benefit… then the asset strippers inevitably take control of government & set to work; flog the said utility at a bargain basement price to their mates who then screw it into the ground again for excess profit. At some point it reaches the stage where its so run down that the whole thing repeats through a renewed Nationalisation & the injection of more public money.
The real problem with Nationalisation is that its part of a long term cycle of largesse for the rich; and thats not even to mention the lucrative public subsidy usually involved in running said asset whilst its in private hands…what the Railways? three or four times the cost to the public in private hands than it was when publicly owned and for the most expensive rail tickets in Europe? Yet Nationalisation as it stands is in effect a rentiers lottery dream with free upgrades.
I see no point in Nationalising any utility unless you can protect public ownership of the assets from cyclical (and cynical) private alienation.
Excellent points, well made
Indeed.
But what gets me is that the public do not seem to realise that privatisation creates another mouth to feed on the supply side – the biggest mouth of all – the investor or pension fund – who is legally obliged to be put before anyone else’s stake and usually gets too big a slice too quickly.
And also the ruse of the valuations – always way to low, undervalued.
Absolutely spot on.
Have you been in touch with Long-Bailey? She’s no doubt aware of this, but could do with a reminder.
And the Press also needs to make the same points.
A mixed economy can work well if regulations are used efficiently.
I used to work as a systems engineer for MANWEB (UK DNO) before it was privatised. I now have regular contact with UK DNOs in terms of connecting renewables to their systems. The DNOs have a similar modus operandi to the mafia – they extort money. Specifically, they make those that want to connect to the network pay for network reinforcement & then earn an income on that asset – since they are remunerated on that asset base. This money extorition activity is aimed at those that want to connect renewables to the network. An anaerobic digestion plant rated at 250KW was recently quoted £13m to connect. This is what you get when you allow the profit motive to dominate.
Furthermore there is a profound information imbalance between the DNOs (run by engineers) and Ofgem (run by lawyers and economists). First hand, I have heard from the DNOs (hello Phil how are you?) how they have run rings around Ofgem. My own contact with this org suggests that they do not employ either the best or the brightest & even if they did, I’d match an engineer any day against either a good lawyer or an economist. This situation has run for 30 years & shows no sign of going away. More regulation & better regulation is not & never will be the answer.
The DNOs when state owned had varying levels of “progressiveness”. My own was by far the most progressive – it was the only one (shortly before privatisation) to answer the question: could we used energy efficiency measures to avoid network reinforcement costs: answer: yes – & energy efficiency measures are cheaper. That said, what they all had was a public service ethos. This needs to be restored.
I 100% agree with the point by Ken W with respect to how to avoid re-nationalisation. One answer could be to make every household living in a a DNOs area and automatic shareholder. The other way fowreard is a Uk constitution & writen into that the state holds in perpetuity
I read the Labour document in its entirety. It is by a very long way one of the best I have read in some time. I would not change a comma & I support it 100%. If the UK wants to de-carb its electricity sector, this is the way forward.
To finish: the current ownership structures of electricity networks block the move to a zero-carbon system. Only nationalisation will remove this obstruction. This is my considered view as an electrical engineer that has worked on both sides of the fence. & no I had no input into the labour document.
Mike
I appreciate that
Richard
My problem with regulation is that it can be blamed for putting up prices by private providers and potentially covers up the other contributing factors (rent seeking).
It might be better to re-nationalise rather than having continuous tussles with rent-seeking providers.
But in one sense re-nationalising is really just a simple and obvious thing to do (look at the travails of Probation service); Labour’s policy pantry however remains pitifully bare for me and they should be re-stocking from places like this.
There is something really touching about the apparent belief that all those involved in a nationalised entity would never, ever contemplate something as evil and disgusting as rent-seeking, while it appears that rent-seeking is the raison d’être for all those who would be involved in the same entity if it were privatised.
Paul Hunt
I have read the so-called (and mis-named) ‘Public Choice Theories’ of people like James Buchanan who
( for example) talk of the phenomena of public sector managers being more interested in increasing the size and budgets of their departments and seeking to over-emphasise their specialty or unique knowledge for their own advantage. You could call this a sort of ‘rent extraction’ – an equivalent of what we know happens in City.
Such phenomena do exist but they also exist in the private sector too because I have worked in BOTH sectors and seen it for myself. Look at VW and the emissions crisis; look at Boeing now; consider the behaviour of the financial sector leading up to 2008.
The only difference is this: in the public sector and nationalised industries, you can get your councillor or local MP involved and they can have a positive impact on putting things right through representative democracy and advocacy. There is more accountability.
The only we choice we have with the private sector is weak regulation and shadowy conversations in boardrooms where CEO’s put stock holders first and everyone else last. If you want accountability in the private sector you have to deal with the well-heeled lawyers first.
For all its faults – I know which one I prefer.
I’m still waiting to see some wanking bankers go to prison for 2008 and I do wonder if the CEO of Boeing will seen in court any time soon for mass murder.
The real public choice for both private and public sectors I feel is for people to be put first.
So thank you for dogmatic sarcasm – but all you have done is believe in the lie that only the public sector acts in its own self interest. I’d say that the public sector – as imperfect as it is – does a better job of balancing self and external interests than the private sector and the evidence is all around you if you could be bothered to look – from zero hours contracts to environmental degradation.
In response to your comment of 6:24pm 17th, I’m afraid you miss my point that rent extraction is universal.
However, I believe the main point – that devoting so much political capital and effort to renationalisation of the energy networks (plus water and rail franchises) is a distraction from the formulation and implementation of urgently required policies in response to climate change and grinding inequality – retains its salience.
Paul Hunt
On the contrary – I have restated and re-affirmed what you said – that both public and private sectors can be seen as extractive (read what I said Paul).
The real difference – to which you seem indifferent – are the mechanisms by which that extraction is controlled and I suggest that there is more accountability in the public sector than there is in the private sector on that particular issue which leads to more balance.
I think that something else is missing too, and that is rent extraction for the good of society (when considering the public sector) is a lot less harmful and perhaps more justified than rent extraction in the private sphere which tends to really just benefit a narrower band of people which with the now widely acknowledged problems with inequality needs to be dealt with.
The increasing privatisation of the public sector will mean less accountability for policy and management.
An example if I may?
I work in housing and I was speaking to a tenant who is now the tenant of a housing association that had been created through an LSVT of a former council house department, and she told me that under the council she could go to her local councillor or MP if she had a problem with her landlord because the officers of the council were accountable to the politicians . Now, she had to engage with the HA’s customer complaints process of about 3-4 stages and then go to the housing ombudsman who has a back log complaints to work through before they even get to her and no powers really to make changes.
I posit that there has only been progress for the ideology of privatisation in this case – not for the service users.
I’m in favour of nationalisation but largely because it’s a simpler and more effective solution than better regulation to the problem of private energy companies running rings round the regulator. The idea would be to change the incentive structure completely by changing ownership – effectively running energy as a not-for-profit service rather than a for-profit service. Having said that, your point that nationalisation is not essential for GND is correct, Richard… although it is one possible solution for delivering the GND, and in my view the most straightforward solution.
Over time I agree
But I would rather the GND had an energy minister’s higher priority
That is my main logic
Interesting how labour is described as wanting to `seize` the grid. Only a few days ago (wish I`d saved it) I saw (in MSM) Labour`s plan for something or other casually described as a `plot`.
After paying over a thousand for a 3 phase connection (£100 materials, 2 hours work) and after a seven year (ongoing) dispute with Ofgem – trying to persuade them that hysteresis really exists- I cocur with Mike.
Richard, regulation is fraught with problems, as your professional area demonstrates only too well. Capture of the regulators by the profit seekers is the norm in our revolving door corporate management, civil service and political cadres. Government policy is inevitably influenced by corporate interests either directly or by money spent on lobbying and in the media – that is money extracted from the supposedly regulated public services themselves.
I get your point about priorities, but new ways of public ownership of public services must be developed, it’s fundamental to any progressive future.
I do not argue with your logic
But the energy sector has limited human capacity
It can do a GNMD or deal with the disruption of nationalisation
Only one can help save the planet
In any discussion in which we engage, the problem is not the certainties or assumptions upon which we may disagree. The problem are those certainties and assumptions we never challenge.
In 7th century Rome the story goes that St Augustine whilst passing through a slave market pointing to some fair haired and blue-eyed children for sale asked his companion “who are they, where do they come from?” They are angles from Britain his companion replied. Not angles said St Augustine — Angels. He decided then to go to Britain and convert the population to Christianity.
Let’s imagine we could persuade Dr Who to lend us the Tardis and we could travel back accompanied by let’s say the whole Tory party to join St Augustine in Rome. To hammer the point home lets also imagine it wasn’t any collection of children but included their own kith and kin, friends of the family and the offspring of work colleagues. Who doesn’t think that every person would be absolutely horrified at what they saw? They would be shouting at St Augustine not to go God bothering in Northern Europe, but instead remain in Rome and fight the evil of slavery. They would instantly covert to become the disciples of that dangerous terrorist and revolutionary — Karlus Marxius. St Augustine followed the rule of St Benedict in those days only the aristocracy were permitted to join the order. He was well educated, brave and possessing all the Christian virtues. Why didn’t it occur to St Augustine that he should be campaigning for the abolition of slavery? It didn’t occur to St Augustine for the very same reason it doesn’t occur to us to campaign for the abolition of Capitalism. It is the only system we all know; we are immersed in the system from the day we are born. Everything we are officially taught, see and hear reinforces the message it is the best possible system imaginable. To be clear in Capitalism the votes of shares trump the votes of people. It is the system where we cede the control of the commanding heights of the economy and our political system solely to the whims of the super-rich. Only the super-rich can own shareholdings in any meaningful quantities.
All this is a round-about way of saying why do we think we are obliged to compensate the super-rich when we take back control of the privatized public services. Adam Smith, David Ricardo and Marx all believed in the Labour Theory of Value. We have already produced all that wealth with our collective labour. Yes, entrepreneurs and those who have provided capital should be compensated, but this is nothing like repeating the mistakes when in 1838 we compensated the slave-owners not the slaves.
The reason we no longer suffer slavery as the dominant economic system is because widely across the political spectrum, we no longer believe in it, we have found something better. Capitalism too is only held up by belief. Once that belief is withdrawn it too will go into decline. However, abolishing Capitalism without a better replacement is a complete no no, chaos we do not need. Economic Democracy is better system to put in Capitalism’s place.