News from Nowhere: Running on Fumes

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Her name was Elsie. She was in her late seventies. In May, her story was put to the British Prime Minister during a live TV interview. Through the colder months of the year, she spends all day every day travelling in circles on the local buses as she cannot afford to heat her home, and this allows her to keep warm. 

The Prime Minister responded by flailing wildly in his characteristic conversational style, before attempting (erroneously) to take the credit for introducing free bus travel for pensioners. 

In an apparent bid to make his boss look slightly less inept, at least by comparison, the Environment Secretary later added that such people should seek help locally and should try buying cheaper brands of food. It is unclear whether he believed they had previously been scoring only vintage champagne and the very best beluga caviar.

He also mistook her name. Her name was not Elsa. Her name was Elsie.

Elsa was the Queen of Arendelle in the Disney movie Frozen. Elsie was just frozen.

(The Environment Secretary at that time was used to people getting names wrong. He was called George Eustice but was more commonly known among his own Conservative colleagues as Mr. Useless.)

Last year, one energy supplier sparked outrage when it recommended that its customers should cuddle pets and perform star jumps to keep warm. Boris Johnson’s government has hardly proven much more sympathetic to the public plight or more attuned to the public mood.

Elsie’s story has come to symbolize the crisis experienced by millions of ordinary British people in the face of the highest price rises seen for decades and, most damagingly, massive hikes in home energy bills, more than doubling (and perhaps soon coming close to tripling) over the course of a year. 

Earlier this month, the UK government’s own advisory committee warned that fifteen million people could be plunged into fuel poverty this winter. Thousands, they said, will die.

Meanwhile, the National Health Service has warned that the country faces a ‘humanitarian crisis’.

Inflation in the UK is now at a forty-year high, already exceeding ten percent and projected to grow even further before the end of the year. This month, it has been reported that the fall in the real value of wages is at its worst since comparable records began. Two weeks ago, one of the country’s largest supermarket chains announced that it would be offering interest-free loans to customers unable to afford to buy food.

In the mid-1990s, I interviewed a senior Tory – at the time, serving as Culture Secretary – who suggested that museums and art galleries were terribly important because they gave elderly people somewhere warm to go and sit on cold winter days. More than a quarter of a century later, such attitudes appear in some quarters to persist.

Earlier this month, even Boris Johnson admitted that much more needed to be done to help people with their energy bills. He did not however put forward a plan to do this, arguing that it would be more appropriate to leave that to his successor.

The country’s most influential consumer affairs expert has accused Johnson’s ‘zombie government’ of ignoring the urgency of an emergency as serious as the Covid-19 pandemic. (However, to be fair on Mr. Johnson, one might observe that at least he is consistent in his inertia. He also did his best to deny the seriousness of coronavirus for as long as he possibly could.)

Such has been the Prime Minister’s disengagement from this crisis (and, in his final weeks in office, from the rest of his duties) that, when he finally deigned to speak with domestic energy suppliers earlier this month, the Metro newspaper ran the front-page headline ‘PM turns up for meeting’.

That gathering included the German company Eon (which made £3.4 billion profit in the first half of this year), the UK’s National Grid (which made the same profit over the last tax year), Germany’s RWE (£2.2 billion in the first half of 2022), and Britain’s Centrica (£1.3 billion during that period), as well as Uniper and SSE, which each took more than a billion last year.

Transnational fossil fuel conglomerations have also been profiteering nicely from the oil and gas supply issues (or at least the reduced degrees of competition) resulting from the ongoing war in Europe. This month, Saudi Oil giant Aramco announced record profits approaching £40 billion for the second quarter of this year.

BP saw its profits soar to £7 billion for that same period, their highest level for fourteen years. Shell promised an eight percent pay rise for its non-executive staff and a £6.5 billion dividend for its shareholders after announcing a £9.5 billion profit for that period. BP handed its shareholders £4 billion in pay-outs. British Gas profits increased five-fold to £1.34 billion for the first half of this year.

The UK Labour Party has said that if it were in power it would raise an immediate windfall tax on such companies’ unprecedented profits in order that it might afford to freeze the national cap on energy prices. Last week, the boss of one of the UK energy companies agreed with the need to freeze that price cap.

A previous Labour proposal for such a windfall tax was eventually (after some resistance) accepted by the current government. (It had finally proven impossible for Mr. Johnson’s administration to continue to argue that this levy would deter those companies’ investments in renewable energy sources, after the boss of BP had said that it would not do so at all.)

However, Tory leadership frontrunner Liz Truss has declared her opposition to such a tax, which she has condemned as a left-wing idea which is all about ‘bashing business’. Profit, she has said, is not ‘a dirty word’. Nor, it seems, for Ms. Truss, is deprivation or poverty.

By contrast, her opponent Rishi Sunak has defended taxing the record profits of energy firms, a policy he introduced while serving as Chancellor. He has also argued that he favours targeted support rather than the ‘blunt instrument’ offered by the Opposition plan. He doesn’t however look set to win.

One opinion poll published last week suggested that only a third of voters would support Liz Truss’s plan for tax cuts, while sixty percent would back targeted subsidies. Yet she has maintained more than a thirty-point lead among Conservative Party members, the only constituents eligible to elect the next Prime Minister.

Ms. Truss’s hostility to the supposedly leftist nature of the apparently un-conservative idea of targeting those most in need with state ‘handouts’ may remind us in this context of some other socialist notions, and indeed of that eminent old leftie Karl Marx’s distinction between ‘use-value’ and ‘exchange-value’. The traditional Tory free-market economics espoused by Team Truss would suppose that fuel price rises are simply the inevitable consequence of demand exceeding supply. This would not however explain the extraordinary scope that suppliers and producers have found to profit from this situation. That potential for profiteering would surely be rather more limited if their products’ economic worth were merely based on their use-value, rather than on what consumers cornered by virtual supply monopolies are willing (or can be pressured) to pay for them.

Let me present a small anecdotal example of this apparently irrational phenomenon. My local supermarket is currently charging significantly more for petrol than its branch just ten miles up the road. When asked why this was the case, it responded that there is a lot less competition in the area in which I live, and it could therefore charge higher prices. 

Similar concerns were raised on a national scale earlier this year when Boris Johnson’s government lowered fuel duties, and it soon became clear that not all retailers were passing on those savings to their customers. One motoring organisation reported this month that the gap between wholesale costs and prices at the pumps had grown to its widest for nearly a decade.

Prices are not merely determined by costs to suppliers, by overall supplies or even by the utility of the product. Where competition is severely limited, as for the moment it is in the energy market, they are determined by how much the producers and providers can get away with charging. 

The war in Europe has not made Scottish gas or Saudi oil substantially more expensive to produce. It has simply created an economic environment in which their ostensible exchange-value has increased – in other words, in which their producers can demand more for their fossil fuels, because the number of competitor suppliers has been reduced. They don’t have to do so. They choose to do so. 

Although there is ultimately a finite supply of those natural resources, their total global stock is not vastly exceeded by current demand. Those fossil fuel giants are simply exploiting a geopolitical crisis to maximize their profits. It is the relatively limited nature of the market competition, rather than limits to the supply itself, which have made these hefty price hikes possible. This is a situation from which everyone in the supply chain has sought to benefit. Recent global shocks have provided a rationale rather than a reason for this.

That is, after all, how capitalism is supposed to work, in the raw. It is what the laissez-faire policies of Liz Truss’s supply-side economics are designed to allow.

This purest form of capital knows the price of everything and the value of nothing. It does not regulate itself. It’s not there to create a fairer society or to assist those most in need. Its function is not ethical or moral.

Instead, that moral dimension is, or should be, the function of a socially responsible and progressive government. Yet that is sadly something of which some of those in positions of power, at least here in the UK, appear to have lost sight.

And that means that this winter many ordinary British people, citizens of the world’s fifth largest economy, will get cold and get sick, and that some of those people will inevitably die.