Is democracy and control of energy possible without nationalisation? Bryn Jones looks at the options for Labour
What should replace the UK’s failing, privatised energy system? Apart from the Labour Party leadership, most left-wing opinion favours partial, or total, ‘public ownership’. But what does this phrase actually mean? Revival of nationalised industry-wide corporations answerable to the relevant government minister? Or combinations of community businesses owned and controlled by mixtures of local residents’ schemes and those of local or regional councils? Or what about a simpler, modest government investment in existing firms in order to acquire a controlling stake? An examination of the advantages and disadvantages of each of these options suggests the most politically and economically feasible form of ‘energy democracy’ may be reform of existing corporations. This should aim to make them more accountable, not only to the authority of the state, but to the wider society. However, this needn’t be a one-size-fits-all model. It could also co-exist with other forms of community-owned or nationalised industry corporations.
Calls for new forms of public ownership often contain the adjective ‘democratic’. But what would this democratic dimension consist of? Nationalised industries have been called ‘democratic’ simply because they have to report to an, allegedly, ‘democratic’ institution: the cabinet of the elected government. Past experience suggests that the democratic accountability in this model is limited. Representation of consumers, unions and other ‘stakeholders’ in the industry’s decision-making was either sketchy or non-existent. All accountability had to pass through the pinch-point of the minister and her civil servants: institutions that have often been more susceptible to the lobbying of powerful political, financial and business interests than unions, civil society groups or consumers.
Indeed, it could be argued that even corporations listed on public stock exchanges have more democratic accountability to a ‘public’ – albeit a public that is restricted to investors in its shares, in which the biggest shareholders have the most say. However, executives – the corporate controllers – have the capacity to stymie investors’ demands. Apart from the ministers, who often act as their grudging bankers, do stakeholders have much more control over nationalised firms? In truth, in both the private and public sectors, formal ownership often fails to confer actual control of the enterprise’s activities. Formal shareholder ownership may still allow managers of the enterprise to act like virtual owners because it is they who formulate and execute decisive policies. On the other hand, campaigning groups have often been adept at using corporate governance to table motions that criticise or influence specific policies. Gordon Brown had the opportunity to widen this influence when campaigners proposed reforms for more corporate transparency in the 2006 Companies Act. He declined to do so.
So, what of Keir Starmer’s much-lauded proposal for a Great British Energy (GBE) corporation? This was received enthusiastically because it seemed, at last, to offer public ownership, albeit limited to the much-desired renewable alternatives to the fossil fuels industry. However, closer inspection suggests the caveats expressed in an earlier policy document, Labour’s Policy on Energy, will limit GBE’s scope and democratic character. That document stated: “Labour will assess how better regulation can make these markets work better, as well as what role public ownership could play in parts of the energy system, provided it offers value for money… [and] is consistent with the fiscal rules.”
GBE will thus be subjected to similar Treasury controls to those that, according to some, handicapped the old nationalised industries. Moreover, GBE may not even have the rudimentary accountability of a nationalised industry. As reported by the Ecologist, it will be an “independently-run firm” that “is not about nationalisation. It’s about introducing a new player into the market”. This sounds depressingly like the competitive markets mantra flogged to a bitter end by successive Tory governments.
The likelihood is that GBE will simply be a bit player alongside the fossil fuel giants, run at arm’s-length from the Government and, therefore, out of reach of genuine ‘public’ influence. It may even lack the limited participatory potential of the shareholder corporation. As a stand-alone company it could easily follow the path of previous state-owned businesses, like Remploy and British Nuclear Fuels: resort to private investment and eventually be sold off on the stock exchanges.
The UK energy ‘market’ is a creation of Tory government policy stretching back to the 1980s. The privatised firms that emerged from the national and regional energy supply boards eventually coalesced into the ‘Big Six’ – now ‘Big Five’ – companies: British Gas, EDF Energy, E.ON, RWE , ScottishPower and SSE (owned by Ovo). Attempts at multiplying competition ended in near-disaster in the mini-crisis of 2019 and the global hike in prices in 2021. In all, 39 small providers failed and most of their customers were transferred to Big Five firms. Because of the semi-artificial system of market pricing, only the big players can ride out the peaks and troughs of raw fuel prices. In the latest wholesale price surge, the regulator, Ofgem, had to reorganise supplies to the customers of yet another failed firm, the seventh-largest in the UK, Bulb Energy, at a public cost of £1.7 billion.
Public ownership advocates, such as Labour for a Green New Deal and We Own It, have campaigned for an expansion of community ownership in the renewables sector. The thinking here is that local control, either by municipalities or not-for-profit community businesses, will stimulate popular support for non-fossil fuels, enhance economic democracy and supply energy freed from exploitation by profit-focussed corporations. This aspiration has already been checked on the continent by governments’ preference for renewable energy to be supplied by the big firms operating massive wind farms and solar arrays. In the UK, a private member’s Local Electricity Bill to authorise licences for local providers has been wending its way through Parliament since 2021. It makes no mention of the preferred type of business to operate such licences.
Eight municipally owned energy supply UK companies have been set up but nearly all suffered financial losses, and several, including the two biggest, Bristol and Nottingham, are closing down because of mushrooming costs largely related to unavailable local transmission networks and the costs of accessing the national grid. Clearly the elephant in all these rooms is the economic power of the Big Six and National Grid plc. Apart from remedial actions such as the Electricity Bill, could these corporations be put under some form of public control? The late, unlamented Johnson Government planned to replace National Grid, owner of the energy transmission system, with a publicly owned “future system operator” by 2024. However, Starmer has ruled out energy nationalisations – perhaps because, in the present financial crisis, even relatively small costs could be politically damaging. If this assessment is correct, then the most effective strategy would be state purchase of a controlling share interest. This should also be accompanied by changes to the Companies Act to empower other stakeholders as shareholders. Models to enhance such shareholders’ rights have already been set out; namely, by campaign groups Shareaction, more radically by ShareSoc and in my co-edited book (chapter 8, Alternatives to Neoliberalism). With more control of corporate executives, coalitions of progressive shareholders such as pension funds and stakeholder-shareholder groups could then, with Government support, prioritise cooperation with smaller, local enterprises, renewables over fossil fuels, and fair but stable financial returns over opportunist profit maximisation.
Of the Big Five energy supply firms, three – Scottish Power, E.ON and EDF – are owned or controlled by, respectively, Spanish, German and French companies. Which leaves only UK-based British Gas – owned by Centrica – and Scottish and Southern/Ovo – owned by a private entity, Imagination Industries Ltd. From an energy generation and distribution point of view, public ownership of British Gas/Centrica would be the easiest and most influential target. Outright nationalisation might be costly; it is currently capitalised at £4 billion. However, as it is a FTSE firm, it has the conventional form of corporate governance. Securing a cheaper 51% controlling stake, accompanied by the kinds of governance reforms mentioned above, could be more effective than nationalisation and easier to enact than targeting the foreign-owned firms. As Centrica straddles both the generation and supply sides of the energy market, it would also give stakeholders and public authorities considerable leverage to bring down retail prices and advance renewables over fossil fuels. The final piece in the jigsaw would be control of the presently privatised National Grid.
This control would make it easier for a constellation of community-owned enterprises (mutuals or community interest companies) to provide renewable energy to their localities and further afield. Again, this new national grid could be under direct state control or, better, as a multi-stakeholder public body, similar to Network Rail, which is overseen by rail company representatives; or better still, the Welsh water utility, Glas Cymru. You have no excuses, Mr Starmer. If you choose some variation on these models, you could maintain your official nationalisation-phobia but also provide the critical accountability dimension which is essential to any concept of a ‘public’ ownership and control of this vital resource.