When Mrs Thatcher spent her days selling off everything that wasn’t nailed down and giving tax cuts to the wealthy Power was just one thing that was floated to the public. After selling off local authority homes and attempting to turn a generation into good little consumer capitalists it was a small step to flog the public utility services.
Selling off the energy companies may have made a raft of new share owning people but how long did it take until the early discounts were traded in and larger corporate investors began to snap up the overwhelming majority of shares? The answer, not long. Nowadays less than 2% of shares are held by small investors (up to 500 shares or about £1600) (Centrica)
£29bn was raised by using the not nailed down- sell it system and a further £18bn from sale of Local authority Housing. All of which were sold at knock down prices.
So the notion that creating lots of small shareholders would disperse any profit amongst the many resulted in huge corporate investors gobbling up little shareholders and concentrating the financial benefits among the few large investors who current comprise 90% of the shareholding (426 investors) (Centrica- British gas)
So again with an idea, the law of unintended consequences comes into play. As Mrs Thatcher was a devotee of Friedman and Hayek and their neo-liberal deregulation agenda, I am not entirely convinced that it was really an unintended consequence.
So What? An efficient market will sort itself out. Well apparently not as the power companies have become more and more concentrated in fewer and fewer companies. Oligopolistic behaviour is dominating the market resulting in massive price hikes and slower reductions when the wholesale price fluctuates.
Ofgem is hardly being effective as keeping the lid on top of the prices as they are fobbed of with wholesale price excuses.
Dont get me wrong Labour under Blair then Brown didn’t re-nationalise these industries. They tried to tinker with the beast and mitigate the impact with support for the most vulnerable sections of society. Cold weather payments, social tariffs and many other initiatives to offset some of the pain being felt as the energy generating firms made supernormal profits. Introductions of new taxes recoup some of the benefits but nowhere near enough.
By selling off the old state monopolies (to stimulate innovation -a la Friedman) we have saddled ourselves with an increasingly difficult situation going forward with fuel poverty for many the outcome.
The supernormal profits generated by these oligarchs are a subsidy that prevents much of the investment in green energy that could have taken place by now which is only now (with other subsidies) beginning to bear some fruit.
As economics is scarcity and choice then perhaps we should choose to control our power generating companies. Perhaps by choosing a real mixed economy model (and not this neo-liberal free market model) we can prevent fuel poverty for more than a fifth of our population. Perhaps we can subsidise electricity and gas to all our citizens and make choices elsewhere that better reflect real priorities.
We can’t afford it you old trot! I have been told. But if we address the tax gap where those who should pay dont (to the tune of around £120bn a year) then a great many other choices are possible.
As an accountant I get frustrated at cuts to tax collectors amid rhetoric of being tough on tax evasion and avoidance. Then we up the vat rate to help the deficit when effective tax control would do a much better job.
A reform of the tax system I will leave for another day however.
Energy Deregulation, imagine the profits ploughed back into the public purse? or perhaps without a profit mark up there would be no fuel poverty?
At a time when Bankers received a bonus pool of £14bn maybe it is just time to start reclaiming the things that should be in public control for the public good.
One thing is for certain it should never be a choice between starve or freeze. Those are two choices that are not acceptable in the 6th largest economy in the world.