Public Ownership of Energy Companies

Sam Tarry Excerpts

Monday 31st October 2022 Westminster Hall

[Sam Tarry (Ilford South) (Lab)]

It is an honour to speak under your chairmanship for the first time, Mrs Murray. This winter, more than three quarters of UK households will face fuel poverty. Many will have to make impossible choices between putting food on the table or keeping the lights on. We are now at the dystopian point where local councils are forced to open warm banks to prevent people from freezing to death in their own beds. Unfortunately, this was the harsh reality for many across the country long before this current crisis. The UK is ranked sixth highest in long-term rates of excess winter mortality out of 30 European countries; that is literally thousands of people dying from fuel poverty because of extreme costs every single winter.

According to research from National Energy Action, the UK experiences mortality rates of, on average, 32,000 more deaths in each December to March period than across the rest of the year. Of these, 9,700 deaths are directly attributable to the avoidable circumstances of living in a cold home. That is about the same as the number of people who die from breast or prostate cancer each year. How shocking is that? The scale of the surge in fuel bills represents the gravest threat to living standards since the second world war. This winter, as fuel poverty skyrockets and inflation hits a decade-high peak, the impact on families cannot be overstated. Unless dramatic action is taken by the Government, countless people could even die, and that responsibility will lie in the hands of the Government and their friends in the energy lobby.

Thinking locally, my inbox is full of desperate pleas from my constituents—from carers, pensioners, local businesses and ordinary people who have not the slightest clue how they or their business will survive this winter. Sadly, they feel incredibly let down by the people in this House and this Government. They think that their pleas are not being recognised, heard or even valued.

Ilford is a proud and diverse working-class community. I have lived and worked there most of my life, and I am proud to still call it home now. It represents the best of our country: its diversity, industry, entrepreneurialism and communal spirit. However, working-class communities like Ilford are suffering—they are being left behind to freeze this winter. The Government tell us that we must all tighten our belts during this crisis and be prepared to make tough decisions and sacrifices. Why do these tough decisions seem to fall on working-class people every single time, when many at the top think that things have never been so good?

This year, Britain’s oil and gas giants are taking home record profits. Last week, Shell announced profits of £8 billion—double its profits for the same period last year. In August, the big five posted quarterly profits of £50 billion. These energy companies are literally profiteering off the backs of the unimaginable suffering of millions in the UK, paying out huge multibillion-pound dividends and bonuses to their wealthy shareholders. It is an immense cost, and it is hurting people.

It is not as if those companies are running an exemplary service for which they should be rewarded. While supporters of privatisation may claim that it benefits consumers and lowers prices, the opposite has been true. Even before the current energy crisis, domestic energy bills had increased by 50% since energy was first privatised by Margaret Thatcher. The UK energy industry is now so bloated and out of touch that it is unable to deliver for the citizens of this country. I argue that it has, in fact, stifled innovation and held back the fight against climate change. Because the market is so desperately out of control, the UK has lost a decade of potential progress on decarbonising buildings, and that has made the task of decarbonising before it is too late all the more challenging. It is hardly cost-effective for the taxpayer, either. Since June 2021, this Government have spent more than £2.7 billion to bail out these failing energy companies.

It is indeed a great energy rip-off. It has sparked palpable public outrage, with people organising on WhatsApp and the internet about not paying their bills in the same way as with the poll tax revolts in the ’80s. People are sick and tired of being taken for mugs by the ultra-rich who are ransacking the economy and making even more money on a daily basis.

There is clearly an alternative. Private UK energy providers must be replaced by a single publicly owned energy company that is run in a way that involves workers and—more importantly—consumers alike. It is the right thing to do for the families who have been suffering for so long. Bringing those energy companies into public ownership, or, as Labour has proposed, starting a new company that could begin to take control and offer better services for all at cheaper prices, would allow us to put a freeze on any further price increases for the remainder of this Parliament—at least until the end of 2024. There could be cuts to current charges and the company could deliver a moratorium on disconnections.

Bringing energy companies into public hands would also generate huge revenues for the state. Analysis by the TUC shows that the Government are missing out on between £63 billion and £122 billion of direct income over the next two years because of past decisions to privatise power plants and the resulting lack of UK public ownership of electricity generation.

Bringing energy companies into public hands would also truly put Britain back at the heart of the battle against climate change—the biggest issue facing humanity. Indeed, the election in Brazil was won partly on that basis. Research by We Own It found that state-owned utilities invest far more in renewables, as they can make use of the state’s ability to plan for the long term and ensure that more ambitious climate targets become a reality.

UK public energy would accelerate the deployment of new clean power. It could include developing new technologies where the private sector is slow to scale up—priming the pump for the private sector to get with the programme—such as floating offshore wind or zero-carbon hydrogen. It would also deliver thousands of good, green, unionised jobs. Evidence commissioned by GMB suggests that where public bodies invest in renewables directly, orders are far more likely to be placed through UK supply chains, ensuring that we all benefit from the climate transition. Nine out of 10 countries leading the green transition have a state-owned company of some description—why do we always choose, through sheer ideology, to do things differently, when there is something that could work for our country and our people?

The energy companies have proven, time after time, that they cannot be trusted to keep bills at affordable levels or to keep executive pay under control. Public ownership could generate billions for the Treasury. It could be the linchpin for a genuinely revolutionary green industrial strategy that could deliver jobs and transform communities from the top of Scotland to the bottom of Cornwall. It could protect millions across the country from the very worst whims of disaster capitalists who are looking to make a quick buck out of the suffering of others.

Some 66% of the public believe that energy should be brought into public hands. I hope that His Majesty’s Government and the Minister will listen and take action. The ability to make a difference on the issue is in their hands, but I suspect that it will be a Labour Government—hopefully soon incoming—who will begin to deliver the change that this country needs.

--- Later in debate ---

[George Freeman]

I did make clear that I am not the Climate Minister, so I am not going to make that commitment on his behalf, but I will make the undertaking that he will follow up that specific point with the hon. Member.

I will make some progress and summarise, not least for those listening and watching, the background to this debate and where we have been with British energy policy. Almost four decades have passed since the privatisation of the British energy system began—long enough that I forgive all those watching who may have forgotten why the original decision was taken.

Back in the 1970s, nationalised industries were run by Government, along with many others, and they were in a very bad state, not least the energy industry. These inefficient monopolies were leaking cash, and they needed much more money to upgrade their age-old and similarly leaky infrastructure. Privatisation, beginning in the 1980s, has completely transformed that situation. I am not suggesting that the energy market is functioning perfectly, but it has transformed that situation.

It is a shame that this debate has had so little balance and so few references to any of the successes of any private industry. Indeed, at times it sounded like a Corbynite litany of anti-capitalist, anti-business complaints. This debate needs some balance. I am not saying that the energy market is perfect, but let us at least acknowledge the extraordinary progress in the last few years.

[Sam Tarry]

Will the Minister give way?

[George Freeman]

No, I am going to make some progress. Since privatisation, the UK’s energy sector has attracted around £20 billion a year of private capital investment into our energy infrastructure. That money would otherwise have had to come from higher taxes or additional borrowing. Those are policies that the Opposition may prefer, but we prefer to secure private capital to secure those public goods.

The cost of transporting a unit of electricity has fallen by 17% since the 1990s, while investment has increased. Energy efficiency has gone up. Reliability has increased. Customer service has improved—though it is still not perfect. The number of power cuts has almost halved. These are the real lived experiences of people over the last 30 or 40 years of privatisation. Finally, current market arrangements have allowed for massive decarbonisation of our energy system, with dramatic drops in the cost of renewables.

It is worth making the point that between 1990 and 2019, we grew the UK economy by 76%, and we cut our emissions by over 44%, decarbonising faster than any other G7 country. That is an extraordinary achievement, secured by the private sector working in partnership with Government. There is more. In the last 15 years, not only have we led the way in decarbonisation; we have also led the way in many of the specific areas of clean energy. We have put it at the heart of the UK’s commitment to reduce emissions as we expand our economy.

Personally, having arrived here following the 2010 election, I would have liked to have seen the coalition and the Lib Dem-run Department of Energy and Climate Change take the opportunity of a “buy one, get five free” nuclear deal and double and modernise our nuclear capacity. The Lib Dems were religious in opposition to anything nuclear—a position seemingly mirrored by the SNP—but they also thought it would take too long to come on stream. I have news for listeners. It would have been on stream now. We would have had a high-quality, green, resilient supply of nuclear energy for one more generation, guaranteeing clean and green resilience, and many jobs in Scotland, and we would have been able to use this period to invest in the range of renewables that hon. Members have hardly mentioned. I will come to those in a minute.

Nobody can look back and say that this was all easy. A lot of mistakes have been made, but the truth is that our net zero strategy is the most comprehensive of its kind. The British energy security strategy sets out extra ambitions to those we set out in 2010. It is on track to secure 480,000 well-paid jobs by the end of the 2030s, unlocking £100 billion in private investment by 2030 and mobilising £30 billion of Government investment. That is not the free market with no support from Government. It is a massive programme of Government in partnership with the private sector, and that is why we have driven down emissions at the fastest rate in the G7.

--- Later in debate ---

[George Freeman]

Yes, I did, and the record will show it. Those interested in how we might build a modern energy economy will observe that there was very little detail on how nationalisation will be done. Very little was said about innovation, new sectors, or how we create exciting areas of innovation, use the smart grid, create a network of incentives, penalties, rewards and points, and empower consumers. There was none of that. It was a litany of the same old Labour and SNP anti-business, anti-capitalist talk of profiteering companies. Those are, by the way, the same companies that pay dividends into the pension funds of our constituents—and probably the trade union barons who are lobbying for this nationalisation. It is old-fashioned economics that has been proven not to work. I was hoping to come this afternoon and hear—

[Sam Tarry]

Will the Minister give way?

[George Freeman]

No, I have had enough of giving way. All Members are doing is repeating the same points that we have already listened to, and I want to make some progress.

I will turn to the winter support for energy bills, which is a really important issue and relates to the second half of the petition. We are absolutely committed to reducing the impact on people’s bills of the terrible global events that I have described, including the impact of the war in Ukraine and of the reopening of the global economy after the pandemic. As this Prime Minister and the two previous Prime Ministers have made clear, we are absolutely committed to helping the British public through this, and we are taking action at an unprecedented scale.

First, our energy price guarantee will save a typical British household about £700 this winter. Secondly, that comes on top of the £37 billion package of support announced earlier this year, which will give all households circa £400 off their energy bills through the energy bills support scheme. That means a typical household saving about £1,100. Thirdly, we are taking further, targeted action to ensure that the most vulnerable can stay warm this winter: the UK’s poorest families will continue to receive £1,200 of support—including £400 from the energy bills support scheme—provided in instalments over the year, with additional support for pensioners and those claiming disability benefits.

Fourthly, the Government are investing more than £6.6 billion across this Parliament in critical work to improve energy efficiency and decarbonise heating. We will deliver upgrades to more than half a million homes in the coming years through our social housing decarbonisation fund, home upgrade grant schemes and energy company obligation scheme, delivering average bill savings of £300. Fifthly, we have extended the energy company obligation from 2022 to 2026, boosting its value from £640 million to £1 billion a year, helping an extra 450,000 families with green measures such as insulation.

Sixthly, it is not just households; we are also taking action to support schools, hospitals and businesses. Through the new energy bill relief scheme, the Government will provide a discount on wholesale gas and electricity prices for all non-domestic consumers in Great Britain and Northern Ireland.

This is not the free-market, laissez-faire, devil-take-the-hindmost economics that has been portrayed this afternoon. This is a Government taking huge and unprecedented steps—on a scale with those we took in the pandemic—to help families, households, businesses and charities to deal with the global cost of living crisis. Again, it would have been nice to hear some reference from Opposition Members to the immensity of that package.

I come now to energy profits—an issue that Opposition Members raised. We are not just cutting bills in the short term; we are thinking about how we can guarantee an affordable, clean and secure supply of energy for this winter and beyond. We have listened closely to the public debate about the profits enjoyed by energy generators thanks to high international gas prices. We have not just listened; we have acted. That is why in May we introduced a 25% surcharge on extraordinary profits in the oil and gas sector, which will raise about £5 billion over the next year. That revenue will support our support for those hardest hit by the rise in the cost of living and cost of energy.

We have brought forward primary legislation to give us powers to deliver a temporary revenue limit for renewable generation in the wholesale market. The details of that proposal will be set out in subsequent secondary legislation, and we are committed to collaborating closely with industry to develop it further. This will return a substantial amount of excess profits—profits made through the price surge—to consumers via suppliers.