Unite, the biggest financial backer of the Labor Party, will urge Sir Keir Starmer this week to reconsider the case for nationalizing the entire UK energy sector after years of what the union calls “speculation” and “greed” by the companies.
The Labor leader has scrapped plans he inherited from his predecessor Jeremy Corbyn to nationalize the power, postal and water industries, though he would keep the railways in state hands. He has also called for the creation of a state-backed green energy company to accelerate the drive towards a low-carbon economy.
The main opposition party has a big lead in opinion polls ahead of next year’s general election and Sharon Graham, Unite’s general secretary, will increase the pressure on Starmer to put the nationalization of energy companies back on the table amid public anger over high bills and record profits.
She will present you with a report from the union’s investigative team that sets out in detail how she believes taxpayers would benefit from state buyout of power distribution networks, the Big Six domestic suppliers, and the South Sea oil and gas industry. North.
Graham conceded that buying the companies would cost between £90bn and £196bn, which would increase Britain’s national debt, but insisted the UK could afford it given it was the world’s fifth-richest economy with GDP of £2 trillion.
“This is not something radical. . . the dial has been turned and we have all seen that the privatization of much of our infrastructure, like energy, has failed,” he said. “We are paying ridiculous amounts for our energy that many other countries do not pay because they own their own energy production. Renationalization is not a dirty word.”
Graham also accused the companies of following a “greed” policy, in which companies raise inflation raising prices beyond what their own price pressures would demand.
“Greed is what is driving inflation,” he said, arguing that the impact of unions pushing for higher wages was “minuscule compared to speculation”.
Graham said the report showed that the UK energy sector was “broken. . . leaving this critical infrastructure in the hands of speculators.” Unite estimates that profits made by the sector in 2022 amounted to £45bn, more than triple the levels of the previous year, and that in a nationalized system the windfall could have been used to reduce energy bills by £1,800 sterling per household.
The analysis noted that while the government had spent an estimated £100bn since the start of the energy crisis to subsidize energy bills, households have still seen them at least double since the start of 2021.
Households in some other European countries have not seen their energy bills rise as steeply as in the UK. In France, for example, state-controlled EDF lost 17.9 billion euros in 2022 after it was required to cap prices for consumers and businesses as it struggled with problems with its fleet of nuclear power plants.
The union’s analysis, which did not include the cost of any new nuclear power plants given uncertainties around the construction schedule, estimated it would cost £196bn to nationalize the UK’s power sector at market prices.
But he also noted that the book value of the companies was £90bn and suggested that the cost of renationalisation could be closer to that figure given that valuations in the sector “were highly dependent on regulatory conditions and government guarantees.
“If we owned our own energy it would cost £90bn, but from then on it sits on the books as an asset. . . generates return,” Graham said. “And then we could regulate what households and businesses pay for their energy.”
Sir Dieter Helm, a professor of economic policy at Oxford, said: “The problem really isn’t the idea that they can’t afford it. They can. Is that what you want to do with it?
He added: “The Unite newspaper is going for the wrong model. But the central theme for all the models is that power grids need massive investment, and some of the grid companies are not in a good position to do what is needed.”
Analysis by the Center for Policy Studies, a conservative-aligned think tank, in 2018 noted that nationalization often required greater current government spending to enable meaningful policy changes: “If profits are to pay borrowing costs , cannot be used to lower prices for consumers.”