I have just posted this thread on Twitter:
We know more about Keir Starmer's energy plan. I was critical yesterday when the first sketchy details appeared. Am I any more enamoured today when we know a bit more? A thread...
First, the good news. Highest on the list is that this is a plan, and that in itself is welcome. When the Tory leadership candidates have virtually ignored the issue Labour doing anything is good news.
Second, the plan could work. I am not convinced by it all for reasons I will note below, but it has, given the objectives Starmer has set for it, a level of plausibility.
Third, this means that debate on this issue has to move up the political agenda. I welcome that.
However, the plan remains deeply flawed for many reasons. First of all, it's only for six months. I admit to being baffled as to Starmer's thinking on this. Is the energy price going to fall so dramatically in those six months that this problem will go away by then?
I do expect inflation to fall next year, and energy prices do undoubtedly tend to go down after peaks like the one we are in. But it is an optimist who thinks that this crisis will be over by next Easter.
Second, the fundamental flaw in he plan is that it only addresses the issue for households. There is no mention of how schools, hospitals and care homes will pay their bills, or how many businesses will survive this winter.
If many of them collapse this winter we will still have a crisis of epic proportions even if household debts might be constrained. This is far from a comprehensive plan as a result, and that scares me. The scale of this crisis is still not being appreciated.
Third, the debt obsession is running through this plan. It is designed as much about not costing the supposed taxpayer money as it is about meeting need.
This is deeply depressing. Labour remains committed to the idea that everything it does is constrained as if the macroeconomy must be run like a household, when that is exactly not the way to run it. I strongly suspect that this has stopped any further plan to help the economy.
Fourth, I rather suspect that within this constraint the idea that £8bn might be raised from a windfall tax on energy companies is optimistic, but I need to see the data.
A windfall tax on banks would be easier, or at least complementary, reclaiming their gains from increasing Bank of England interest rates, and £8bn from a windfall tax on that source would be very easy to secure on top of any gains from energy companies.
Fifth, the plan still delivers a significant gain to the best off households. I remain unsure that this is well targeted as a result. It certainly does not meet the IMF's suggested criteria for support on this basis.
Sixth, I am presuming much of the planned Tory support for lower income households remain under this plan, although some will actually be quite generous now. I have not seen this confirmed though.
Seventh, the plans for prepaid meters look to be good, but I have not seen clarity on standing charges, which I think have to go.
To summarise, given that Labour cannot actually deliver any plan this one has the merit of getting the issue firmly onto the agenda. The Tory leadership candidates will not be able to avoid it.
But there is still poverty in Labour's thinking that suggests it is not addressing all the issues, like the cost to public services and businesses, which may be just as serious as the household cost. Their debt obsession may be preventing that and this worries me, a lot.
And, the plan is for too short a period and is not well focussed. It's welcome, but we need better. I hope to publish my own plan later today. It's a lot more comprehensive than this, but it does tackle all the issues.
It will also cost a great deal more but we are now facing an economic crisis as large as those in 2008 and 2020, in which case spending is required and debt obsession is not. I have not made my last comment on this issue, in other words.
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The public seem much more relaxed about increasing ‘borrowing’ than are Labour. As you say, the Labour proposal at least opens up the debate – so ‘borrowing from ourselves’, and taxing away the banks unearned windfall from high interest rates can at least appear on the agenda. Also as you say – what about small businesses, hospitals, schools etc.
You are being quoted about giving to higher income households on R4 Today interview with Starmer
“Is the energy price going to fall so dramatically in those six months that this problem will go away by then?”
I don’t agree with much of what ACER (Euro energy regulator) says but on one thing we are agreed, gas prices may relax down from the Euro206/MWh they currently stand at (in Jan 2021 they stood at Euro20/MWh – so only a 1000% increase) but this may be into the range Euro80 to Euro100/MWh. This feeds through to marginal electricity prices of around Euro200 – Euro250/MWh for electricity (based on CCGT generation), which is roughly 5x the normal “run-rate” of Euro40 – Euro80/MWh.
Thus if energy prices feed inflation (and they do) and these prices are likely to be the reality in 2023 (predicted by ACER and we agree that this is the BEST scenario) then the UK needs electricity market reform as soon as possible – split the electricity market into two and do the same to the gas market based on home produced gas (priced in at £20/MWh) and imports at market.
Liebore’s plan shows that (almost?) nobody in the org understands how energy markets function, how the UK’s electricity market functions and why marginal pricing as a way to price wholesale electricity is well passed its “sell-by-date” (pun not intended).
It also suggests an unwillingness on the part of Starmer/Liebore to confront vested interests. The owners of nuclear power stations are now making massive profits (the levelised cost of nukes is around £60/MWh – they are getting market @ circa £100 – 200/MWh), ditto the hydro people (step forward SSE and SP aka Iberdrola) and the renewables on ROCs (Renewable Obligation Certificates) were built on the basis of wholesale at £50/MWh and ROCs at perhps £30. They now get wholesale prices at least 2x what they planned for.
Windfall profits aside, this is what happens when ideology gets in the way of reality. There is nothing wrong with marginal pricing when all generation has input costs. When large and growing segments of generation do not then highly unstable wholesale prices occur and with a gas price shock, massive windfall profits.
As I remarked to the REA (Renewable Eenergy Association) with whom I spoke last week on elec market reform: I don’t do “points of view” I put forward realities. The imbeciles in Liebore and the tory-vultures are welcome to batter themselves to pieces against these realities. Sad thing is, the only people suffering are UK (& Euro) serfs and the economy as it collapses around them. The energy crisis has shown the total & utter incapacity of political parties and institutions to address the situation.
Thanks as usual
I try to reflect this in the plan out this morning
Saw the plan this morning – I thought the energy bit provided a good explanation of the problems. I hope it sees a wide circulation.
Thanks
It seems to me that the effect on business is key (and I’m sure will be reflected in your plan). If (when?) businesses providing services to the public go down, I believe that’s when we are likely to see unrest. The fact that Starmer’s plan doesn’t appear to recognise this is a serious concern, and one that can be exploited by the Tories.
If either of the candidates for PM was smart (or had smart advice!), they’d do something like Mike Parr’s suggestion on your blog yesterday –
“Two step plan.
a) reform wholesale elec market such that generation costs are reflected by wholesale market prices. As already noted – this will require a maret split (already proposed by the Greeks – last year and supported by others – Uk could do the same). Rough calculations suggest that wholesale prices would fall below £100/MWh into the range £70 – £90/MWh. This should immediately feed through to retail prices & take much of the sting out of the current situation.
b) gas – split the market – into home sourced gas and that imported. Price the home sourced at £30/MWh (versus circa £150/MWh now). All the infra built to extract the gas was based on a wholesale price of circa £20/MWh. I’d hazard a guess that an “order in council” could do that (the same route was taken to abolish exchanged controls in – I think – 1980). The end resuolt would be a hybrid price much much lower than what is the case now. Companies would shriek – so what.”
The question I’d like to ask of Starmer – or should I say, the morons who are his ‘political advisors’ is – ‘Why so timid?’
This is politics for well-heeled back seat drivers – not people in need.
Do you think that the debt obsession and the paucity in the scale of Labour’s and detail of thinking is actually that or are they petrified of vilification in the neo-liberal media?
Apart from the moral obligation Labour has to suggest solutions and highlight problems how many serious issues, like this, has Labour not taken advantage of to flatten the Tories? How many windows of opportunity are they going to spurn?
I think Starmer’s plan is not enough. It’s a sticking plaster because he refuses to go down the nationalization route. Like the Tories he seems to hope that in 12 months time prices may well come down, but the key question is by how much?
Let’s look at the reality.
Average energy bill around £1200 a year could be between £4,000 to £5,000 by next summer. That’s a 300 to 400% increase. Official inflation 9%, predicted to 13-20%. Go pull the other one! If the price does come down in the wholesale market will the energy companies fully pass that on to us? They don’t have a good record in this regard and then there is the standing charge con. I reckon this could hit £1 a day for both Gas and electricity by next March. That would mean £730 a year just to have the meters on your property. According to my energy company, the standing charge is to “maintain the network” . Note to Labour, take into public ownership the maintenance of the network thus removing standing charges from the energy companies.
Everything we need and have no choice to pay for is massively going up. Mortgage, rent, Gas, electricity, water, etc, and now even food. This will destroy the discretionary spending part of the economy as people cut back. How can it not?
The only answer is the one Labour are afraid to do, that’s public ownership. This needs to be done alongside a comprehensive green energy plan.
Here’s the winner that Labour is missing. Energy security. It’s clear that when you depend on supply from overseas the chances are it could backfire on you, when tinpot dictators like Putin decide on a military adventure. We need a comprehensive green energy plan to become as self sufficient as possible. It ought to be a vote winner as both an energy security and national security necessity.
Energy supply as a security issue. That is where I think we are right now. Vote winner Mr Starmer.
See my plan……