Why I don’t think partial nationalisation will solve the energy crisis

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*This article is an attempt to look further at questions around the cost-of-living crisis. As we get into practical solutions, this does start to politicise things.  I don’t favour Christian leaders making party political pronouncements. However, public theology and ethics will involve some engagement with political application and there should be room for charitable disagreement. I therefore write from time to time on these kinds of issues here because I think it is good for Christians to have a lively interest in such things.  It is also helpful to see why there can be political divergence between Christians.  We can agree that Christian discipleship calls us to love our neighbour and that this includes care for the poor and vulnerable.  At the same time we may reach different conclusions about how best to achieve this.

Some readers however may prefer to skip this article in favour of those that focus on more pastoral issues.

One of the proposed solutions to the current energy crisis is the one made by Gordon Brown that the Government should scrap the current energy price cap and renegotiate new, affordable energy prices.  Those companies that are unable to meet the new tariffs should be taken into public ownership to ensure that a service is going to continue to be provided.

Before, we talk about the specific proposals here, allow me to declare my hand. I’m aware that there will be readers of this blog who take a different political and economic view to me and will prefer to see not just some of the energy companies temporarily nationalised but all of them permanently nationalised. That arises out of a particular, principled political worldview, in effect a form of socialism. 

I don’t favour nationalisation in general. My preference is for a smaller state and I’m not convinced that there is a sustainable moral or economic argument for nationalising industries.  Now, some are politically happy with any form of state intervention so that the State can own any means of production as it sees fit. Others have tended to argue in more recent years that whilst some industries are more obviously private that there are some things that should remain public utilities.  The argument is that some things are really basic essentials so that morally you shouldn’t profit from them and no individual or organisation can really claim ownership of them.

The problem then is when we look back historically -and for Christians when we look Scripturally, I’m not sure we find evidence of that being the understanding. If we consider those public necessities to include water and fuel -some even include transport in this – then why not food, clothing and housing?  However, the reality through history is that people have always been seen as responsible for finding and producing those things. You would hunt, forage, farm, you would build, knit and sew.  Then where you were not able to provide those things yourself, you would find others who had the skills and resources to do so and you would barter with them, so that they would benefit from those goods and services you could provide which they could not.

Incidentally, not only did this include food and clothing but fuel and water too. You didn’t pay someone else for because you were able to go and collect it yourself.  And there’s the point.  Arguably, I could still provide those things myself, legislation and regulations permitting. I could gather my own rainwater and store it.  I could gather wood and burn it on a long burner.  Indeed, when I pay the gas and electric bills, I’m not doing so because I cannot generate fuel myself. I’m doing so because I would prefer to have clean gas piped into my house to keep the central heating system running. I appreciate the comforts that come with that as opposed to chopping wood, filling my home with wood smoke and having to heat cauldrons of water over the wood stove when it’s bath time.

This takes us to a further argument deployed in favour of nationalisation in general. The argument is that because companies had been in public ownership, we already owned them prior to their sale. However, this assumes that the public, that society and the State are the same thing. However, I think it is obvious that the modern state has an identity distinct from society at large. One way of helping us to think about that is to consider that if something is owned by us all and is a necessity for us all, then it is reasonable to argue that it should be provided free at the point of use.  That’s the principle with education and healthcare, although the latter is compromised by dental and prescription charges which in effect add an additional tax falling disproportionately on the chronically sick. So, if our fuel should be publicly owned then surely it should be free at the point of use and the cost added to our tax bill. That we had to pay for our fuel and transport separately even under nationalised ownership indicates that we were never truly viewed as having a share in that ownership.

So, that’s why I’m unpersuaded by nationalisation in general and I’m sure there are bloggers out there who will want to offer an alternative viewpoint.  I may even give space for a guest post right of reply. To be clear, I’m not saying that there is no case for it. If nationalisation can be shown to work in looking after the needy, protecting the vulnerable and ensuring fairness then we should consider it. My point is that it’s historical and Biblical pedigree doesn’t quite justify the moral certitude with which some advocate for it.

What then about the specific solution proposed by Brown and others. In effect this is a proposal to subsidise the cost of fuel and for the State to step in for an emergency situation.

My first concern is that this approach doesn’t take into account two things. The first is that it misses the extent to which subsidies are already happening.  People have been quick to point out that the large energy companies are making what seem to us to be extravagant profits. However, we risk overlooking that those profits are not coming primarily from their provision of energy to us but from things like refining/processing and wholesale trade.  This also means that whilst the larger organisations have made huge profits, smaller energy companies have struggled in recent years. So, those getting excited about Brown’s proposals enabling us to punish the fat cats are going to be disappointed.

But what this means is that if profits are primarily coming from other parts of a business, then the more profitable parts of the industry are already subsidising the less profitable bits.  Our gas and electricity is already subsidised by our energy suppliers. The price cap forces that and indeed, one reason why it is likely to go up is to try and protect those companies that haven’t got the resources to subsidise from elsewhere.

What this means is that people forget that the cost of nationalising a company or offering a publicly owned alternative is no small thing. You don’t just need to take on the customer base but also need to take on or replace the infrastructure around that and you need to keep purchasing the necessary raw materials and pay for processing, transport etc. In that respect, this is a lot more complex than nationalising a bank.

The second thing not properly taken into account yet is that this energy crisis is likely to be a long term problem and therefore inflation too.  Doing things that freeze prices today is unlikely to be anything more than a short term solution.  We are just suppressing prices that will then rise dramatically.  The assumption behind such measures is that the cost of living and energy crisis is just a short term temporary thing. 

As I’ve argued before, I think that the wider cost of living crisis and associated inflation has been something a long time in the making and may well go back as far as the roots of the credit crunch. Remember how the Great Depression wasn’t something that happened over a few months.  Consider how the Japanese economy suffered over a long period of time around the turn of the century.  There are therefore inflationary pressures distinct from the fuel crisis, exacerbated by the pandemic and that’s why the Bank of England is using monetary measures through rising interest rates in response.

However, the fuel/energy part of the crisis is a significant issue right now making things worse. But if we think that at some point in the next few months either through negotiation or victory for either side that the Ukraine war will end and all of the current problems with high gas prices and shortages of grain, oil, other products will disappear then I think we are in for a rude awakening. We must be ready for the possibility that Putin has a long term strategy, in effect a new cold war where Russia seeks to further its ambitions by threat. Fear and economic measures with the desire of impoverishing the west.  If that is the case, then we need to be ready for the possibility that he’ll use the supply of gas and its cost for years to come.

That being so, we need to consider how we prepare for this longer term challenge.  We cannot simply subsidise and/or nationalise for a year or two.  We need to consider how we can get to a place where we are not dependent upon Russia and vulnerable to Putin’s threats and blackmail.  This means that we need reliable, alternative energy sources.   Putting them in place through switching more to renewables, reversing short sighted decisions to remove gas storage and revisiting fracking and nuclear options will take time too.

So, we need a long term solution but we also need to think about how we cover the gap in the short to medium term (which is going to be a longer period than just the length of this specific war).  My view is that this will include two things. First, we’ll need to prioritise when an where fuel is used. That might mean that we need to ration energy usage in some contexts.  For example, whilst it may make life a little bit more uncomfortable in a heatwave, is it really a priority for shops to be using high levels of energy to run air conditioning? 

Secondly, yes, we will have to do more in order to look after the most vulnerable and least well off through the winter months.  My personal preference is to use the Biblical principle of Jubilee and gleaning to encourage both customers and companies help look after those most in need.

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