AndrewPointon.com

Large profits inflame fuel debate

Last week’s announcement about the research commissioned by the Local Government Association (LGA) on energy companies’ profits in the UK highlights not only the scandal of rising energy bills, but exposes the myth that privatisation brings benefits to the average householder. In the 1980s Mrs Thatcher’s government told us that ending state monopolies through privatisation would give consumers greater choice through competition, and the subsequent competition would result in better service and lower prices as suppliers fought for our business. The figures published last week seem to suggest otherwise. Indeed while ordinary people have seen a huge leap in domestic electricity and gas prices it seems that shareholders have been enjoying the benefits of ever bigger profits.

The LGA research shows the biggest suppliers increased their dividend payouts to shareholders by £257m last year, revealing that altogether the six biggest companies paid £1.635bn in dividends – a 19% increase on the 2006 total of £1.378bn. According to the research by consultants SQW, Centrica increased its dividend payout from £409m to £478m, EDF from £105m to £110m, RWE Npower from £37m to £250m, and Scottish and Southern Energy from £400m to £474m. My current fuel supplier (who sent me a letter about increased prices which arrived today), E.ON, paid no dividend in 2006, but paid out £240m in 2007. Scottish Power was the only one of the “big six” to cut its dividend payout with a reduction from £427m to £83m. The bumper payouts come as the average household fuel bill has soared by 42 per cent since January and it questions suppliers’ claims that they needed to maintain high prices to invest in new forms of energy for the future.

While Gordon Brown and his ministers work this week on measures to ease the pressure on families from increasing bills, it seems that the government has now decided against a one-off windfall tax on the suppliers. However the LGA wants the government to require the energy companies to finance a national home insulation programme to the tune of £500m-a-year for the next five years. “This would allow the energy firms to continue being profitable and provide the best long-term solution to cutting carbon emissions and fighting fuel poverty,” Sir Jeremy Beecham, the acting chairman of the LGA said. “There are 10 million homes in this country that still lack basic insulation. Making these properties more energy efficient would knock £2bn off fuel bills each and every year and also slash domestic household carbon emissions by a fifth. The government and Ofgem [the regulator] should seize the opportunity to take a long-term solution to encourage the energy companies to use their disproportionate dividend payments for a massive drive to insulate people’s homes.” Quite right.

Understandably there is anger at these rises especially in the climate of “inflation-busting” low annual pay awards. Public services union Unison said: ‘At a time when some people are considering whether to heat their homes or put food on the table, this is going to seem very unfair.’ Gordon Lishman, the Director General of the charity Age Concern, believes that the scale of the dividend payouts would anger elderly people struggling to pay their heating bills. He claimed: “Many of the poorest pensioners will be outraged that, whilst they are worrying about how to afford to heat their homes, energy companies continue to make significant profits and pay their shareholders increased dividends”.

The tragedy of the “selling the family silver” privatisation policies of the Thatcherite Conservative governments of the 1980s and 1990s has been compounded by the current Labour Government’s alignment with the needs of big business rather than the needs of ordinary working people. If it has any hope of obtaining a fourth General Election victory, and saving the country from the horror of the Conservatives, then Labour has to get back to its roots. Reassociate itself with the people the party was formed to represent, and fight for improving the economic and social conditions of Britain’s poorest and neediest members of society and not ritually kowtowing to big business.

[Based on reports in The Guardian, and Metro newspapers]

One Comment

  1. Pingback: Pages tagged "fuel"