“To nationalise, or not to nationalise, that is the question”

6th Nov 2017

 

Forgive me for misquoting Shakespeare on energy policy, but working so close to Stratford on Avon, you’ll forgive me

But is it nobler in the mind to suffer the slings and arrows by asking this fundamental question? We can’t ignore the fact that according to YouGov over half of the public, (53 per cent), want to see energy companies nationalised and at least one political party wants to do it.

What might this mean? Well the history books tell us all was not perfect in the “good old days”. Industry waited each year to be allocated capital spending levels and guess what, schools and hospitals were first in the queue. So for planning forward investment, nationalisation may not be the best tool. Using a regulator to tackle natural monopolies still seems the best option – allied to a long-term investment framework that marries the time-scales the industry works to, with investment monies available and making a “fair” return.

But what if you wanted to show how left-wing and “down with the people” you were? Surely nationalisation is a great way to show off. It might be, but what will it achieve? Two weeks ago, the Committee on Fuel Poverty reported that fuel poverty in England could be eliminated by spending £15 billion on energy efficiency measures (reduces bills and lowers carbon emissions too) or I could buy the Cadent gas networks with the same amount. I would argue the former is a more “socialist” policy.

Ignoring the wider macroeconomic impacts upon interest rates of borrowing large sums to nationalise the networks, what happens if they are bought by the state? Having spent, anything up to £100 billion to pay for the networks who will pay the estimated £100 - £300 billion to decarbonise heat? These sums are huge but on the plus side, if you’ve just bought the gas networks you are hardly likely to make them obsolete – which was Coalition policy in 2010 remember.

Last week I asked the energy industry to listen to the consumer – they are the voters and it pays to consider why nationalisation is so popular. Energy companies have lost the trust of the people. Winning this back, requires a hearts and minds campaign the networks probably had not reckoned with. As Will himself said, “The course of true love never did run smooth.”