(Democratic) Public Ownership of Energy Now!

By Adam Peggs

Among the most popular demands made by the Labour Party in the last five years was for public ownership of the utilities companies, and before that its on criticisms of the energy sector under Ed Miliband. As part of the Labour Party’s Environmental policy consultation, closing on June 30th, Labour for a Green New Deal calls on the party to adopt a variety of demands as part of a ‘People’s Green New Deal’ to ensure a just transition. Their letter (linked here – and I would encourage readers to submit it) includes calls for universal broadband, publicly owned green transport, unionised green jobs and crucially, for public ownership of key industries. Public ownership of the energy sector is the most obvious and one of the most pressing areas to focus on here, as well as one of the most popular among the wider public. The policy of public ownership of the Big Six energy firms was adopted at Labour’s 2019 conference and included in the party manifesto last December, but it appears that old conference resolutions are not understood to still stand. Before that Labour had adopted backing for public ownership of the National Grid in 2017 and public ownership of the energy networks in spring 2019. Notably, both of these aspects of the energy system are ‘natural monopolies’, where a ‘competitive’ case for their privatisation simply does not exist.

Nicky Hutchinson, writing in New Socialist, has argued that the current Shadow Energy Minister is not keen on public ownership of the sector as a solution. The Shadow Business, Energy and Industrial Strategy Secretary, Ed Miliband, has embraced numerous left-wing policies, but was not an advocate for public ownership in the sector when he led the party in the 2010s. Instead, during this period he advocated for the Big Six energy firms to be ‘broken up’, thus creating a more competitive and potentially less extortionate market. Other members of the Shadow Cabinet have also described the pledge to renationalise the sector as a ‘waste of money’ (as if the money were not being spent on acquiring a key asset). My guess would be the first area in which the party could row back on public ownership would be the Big Six companies.

During the Labour leadership contest earlier this year, Keir Starmer was initially reluctant to back public ownership beyond the railways and the postal service. However, the slightly more ambiguous promise for ‘common ownership’ of energy did make it into the new leader’s ‘ten pledges’. He also backed public ownership of energy, broadband, and several other sectors as part of We Own It’s campaign. Though it is notable that another candidate did the same during the contest, but subsequently went on to emphasise that they mean’t ‘common’ ownership in a broad sense and that they favoured a more gradualist approach to the issue. It was only in the final stages of the contest that Starmer, while being interviewed by Andrew Neil, appeared to explicitly back the inclusion of public ownership of energy in Labour’s 2024 manifesto.

Together, these facts have left some scratching their heads and fearing that commitments to public ownership of energy could be watered down or abandoned in the coming period. On the Labour benches in parliament, there is a good deal of support for solutions such as co-operative ownership, a ‘mixed market’, and possibly ‘public benefit companies’ (a form of private corporation common in America) or private but non-profit ownership. All of these solutions represent improvements on the status quo – but none of them represent an adequate solution for the sector. There is already pressure for the party to move away from ‘Corbynomics’ and dropping signature policies around public ownership would be one obvious way of achieving this.

When it comes to fulfilling the social and economic needs of people, energy markets in the United Kingdom have been a serious failure – as they have been elsewhere in the world. The very existence of energy markets in this country is essentially a modern invention, a consequence of Thatcher-era privatisations and the attempt to reshape the sector to reflect the logic of neoliberal economics. As Chris MacMackin writes, this has left us with the government ‘trying to construct the market so that it will choose what we already know to be the optimal outcome’. This is not just an odd way of organising a sector of the economy, but an irrational one.

The Big Six suppliers (and often smaller suppliers too) have served to line the pockets of shareholders at the expense of households. ‘Excessive prices’ alone cost UK households around £2bn a year. According to research published by Greenwich University, the ‘real price of gas and electricity has increased by 133% and 67% respectively since the year 2000’. Public ownership, on the other hand, would appear to save the public over £3bn a year in costs that would otherwise be paid out as dividends. The international examples also strongly suggest that public ownership equates to lower prices. And while they remain in private ownership, a key sector of the economy which provides an essential service remains insulated from democratic control.

Frequently, the high cost of nationalisation is cited as a justification for opposition to public ownership. But based on historic precedent parliament will ultimately get to set the price, so the assumption that shareholders will be compensated with full market prices is a flimsy one. The European Court of Human Rights backs that precedent. Greenwich economist David Hall argues that in 2019 the total cost of compensation would come to about £56bn for public ownership of four areas (energy, water, Royal Mail and broadband) – far below the inflated figures put out by the Tories. The government would then own revenue-generating industries, allowing nationalisation to finance itself. The question of ‘how the government is going to pay for it’ has long been absurdly overhyped. And as a range of economists have long argued, countries like the United Kingdom already have enormous flexibility when it comes to financing their policies and funding public services. As I’ve suggested, this is particularly the case when it comes to financing public ownership.

As many have long argued, natural monopolies belong in public ownership – anything else allows one company to reap the rewards of dominating the sector. Any model that retains shareholder ownership of the National Grid or the network operators would allow for the public to continue to be fleeced by monopolists. Ownership by a private non-profit entity might prevent extraction from shareholders but would leave the grid and the networks insulated from public accountability and democratic control. Ownership by co-operatives would avoid some of these pitfalls, but still fall short of direct public control and could well lock in a market ethos. In some cases, existing co-ops in Britain have in effect excluded working class households from participation via high costs for shareholding. As such, public ownership, along genuinely democratic lines rather than the old school model of postwar Britain, represents the best way forward for both the National Grid and the network operators. This case was well made concerning the network operators in a report from Rebecca Long Bailey last spring. And it is a great shame that Long Bailey will no longer be able to make the case for public ownership from the Shadow Cabinet – though I am sure she will be doing so from the backbenches.

However, addressing the ownership of the National Grid and the networks is not enough. The energy companies have ripped off the public for years. Public ownership of the energy companies, as is already the case in numerous countries, is a basic social democratic demand. Those pushing to dispense with public ownership in this area, are making an error and pushing for an unneeded and counterproductive accommodation with neoliberalism. One that socialists and Labour members should not support. A just transition will require greater public control of key aspects of the economy. Utilities that provide key everyday services such as energy are an obvious priority. For socialists and social democrats, democratic public ownership of energy is an important demand.

Because the Green New Deal means economic reform and abandoning neoliberalism, it needs to involve ending the privatisation of the Thatcher era. Ultimately, different forms of private ownership and better regulation won’t cut it. Renationalising the energy companies is far too important a pledge to be dropped – so get ready to defend it.