Nationalising the folks who send the bills first as a knee jerk to the current crisis will not achieve this, it would be an expensive sticking plaster at best. It would probably mean it is even less likely that we see the stuff that really counts being brought into state ownership.
Bulb is more or less controlled by the state. It is nationalised now in broad terms. It's in the special adminstration regime, and under control through ofgem and the government's funding.
Nationalisation is already underway! It's just been done in a way to avoid be labelled so.
I gave you what I believed what another viewpoint that did not fit with your statement. One that basically says we should focus on helping people and then fix the entire energy sector properly
What you have done about Bulb then given it was close to collapse? This was back in November 2021. That was your signpost.
I've said in another thread helping people with bills and nationalisation are not mutually exclusive.
Bulb is more or less controlled by the state. It is nationalised now in broad terms. It’s in the special adminstration regime, and under control through ofgem and the government’s funding.
I’m genuinely interested to see how Bulb reacts to this round of the price cap. I think that will be most telling as to how much government appetite there is to push it further. As far as I can tell right now, they have just followed the pack with prices.
Because the energy supplier market has ceased to function without government intervention.
I don’t know that there’s another viewpoint.
The other viewpoint is the energy billing market IS and always has been direct government intervention.
Bulb is more or less controlled by the state. It is nationalised now in broad terms. It’s in the special adminstration regime, and under control through ofgem and the government’s funding.
Nationalisation is already underway! It’s just been done in a way to avoid be labelled so.
I'd argue its the complete opposite to nationalising the industry and avoiding it.
In terms of importance I see getting rid of billing companies as more urgent than power generation.
It's possible (not necessarily preferable) that the entire post generation stream could just purchase energy from whoever can supply it cheapest... and market competition is driving costs at the generation end only.
It’s possible (not necessarily preferable) that the entire post generation stream could just purchase energy from whoever can supply it cheapest… and market competition is driving costs at the generation end only.
What are your thoughts on one monopoly state supplier going to the producers?
Surely that would be a big bag of clout?
The other viewpoint is the energy billing market IS and always has been direct government intervention
Fair comment.
Martin Lewis said it was neither it was the worst of all worlds.
Personally the intervention doesn't seem to do that much in my eyes.
I think from a consumer pont of view it's as shoddy as hell. The billing systems is a confusing mess and swapping about is nowhere near as south as they lead you to believe.
Customer services is appalling too.
I just can't see the point in several suppliers.
Smooth not 'South.' Wally.
Things do tend to go South quickly when you dare to swap.
Just have a state operated biller, and let the others fight for survival. People would swap to the state operated biller more and more as each energy crisis hits (this won’t be the last one).
Here are some suggestions to save consumers £1500 per year. Easily done by a determined govt. But not sure we have that.
Bulb bail-out bill likely to exceed £4 billion - per FT.
The threat or the actuality of people not paying their bills will force the government to do something. If nothing is done before cap increases I will either stop paying or reduce my DD.
'Don't Pay'
And they'll take your TV away 😆
You’re right, we are. So why are all the conversations primarily about nationalising the company who (and I am being overly simplistic here) only works out the bills? Rather than the actual companies who generate, store and deliver the utilities? I would gladly support any effort that took into account the whole picture.
Is that the conversation that was happening?
I had assumed when we started talking about re-nationalising the energy sector we meant the whole lot from purchasing gas through to generation and distribution and of course those billing outfits...
As pointed out earlier your billing company may well be a separate arm of a larger commercial outfit that does all of those things already.
The example of RBS back on 2008 is a particularly good one actually. "Too big to fail" so we dipped into the kitty and bought a substantial chunk of a bank (was it a controlling share?). Anyway it amounted to something quite close to nationalisation, and meant the bank had a major shareholder that could put up with losses for far longer than any pension fund or private investors would. I'm pretty sure having seen them though that particular rough patch the government have since divested themselves of those shares.
But there's your short term "solution" government buy up of shares in energy sector companies concerned about cap derived losses and the regulator can set truly affordable caps without worrying about those poor old investors and breaking yet more companies... Still a short term solution, but one for which there's a degree of precedent and which can be implemented relatively fast (if you have some sort of functional government)...
Longer term there's a wider discussion to be had perhaps about public Vs private delivery of energy and infrastructure and ultimately security of supply, how we ween ourselves off of gas and meet growing leccy demands, where the investment comes from for that and who should ultimately see any derived profits.
But now isn't the time, the issue today is shoring up the system that exists and insulating the most vulnerable from unaffordable energy prices. Otherwise Lizzie's first few months in power will see pensioners and the poor freezing to death...
Just looks at Bulb, the ‘nationalised’ energy company, to see how it doesn’t work with the current system.
If I remember correctly, Bulb are now hamstrung by not being able to hedge due to government restrictions which were not present when Bulb was private, this means Bulb is very expensive for the government to run.
There's a lot of naivety going on here. If just the bill collectors were nationalised what makes you think this is going to be of any use in bringing down costs? The new nationalised body would still have to buy the power from the wholesale market but with the benefit of a blank chequebook. I can't possibly see any way that could go wrong from an undeclared (or uncared) conflict of interest.
That's actually the last bit I'd nationalise. Even now Scotrail is "government run" but Abellio is still providing the same back of house services they were before as a contractor.
As others have said, the whole lot needs done starting with generation along with the long called for reforms to the wholesale market.
There’s a lot of naivety going on here.
Is there?
I mean those of us in favour of a "nationalised” energy sector (or at least share buyouts) are perhaps a bit more focussed on the idea of buffering the inevitable losses that come from charging affordable prices this winter, exploiting (most likely eroding) our own national credit rating. Otherwise what's the point of having it?
Gas suppliers, generation and distribution outfits will all get their (fixed) costs covered, so ultimately it's going to end up being those billing companies that carry on making losses stuck in the middle, restrained by affordable caps, so why not buy that debt out in the short to medium term?
For all our naivety I don't hear any real alternative solutions being put forward, aside from letting the poor freeze and/or starve to death this winter...
I wasn't talking about you, I agree with your approach, more the folk that think just nationalising the suppliers is a useful solution. Maybe if you're a shareholder with SSE, OVO or such but otherwise it isn't actually fixing anything. The prices are a symptom, if you just treat that then the problem will never be solved.
If I remember correctly, Bulb are now hamstrung by not being able to hedge due to government restrictions which were not present when Bulb was private, this means Bulb is very expensive for the government to run.
Other than the fact the government can always afford it.
The government's purse is not financially constrained. Ours is.
Hedging didn't appear to keep Bulb from collapsing. There was a lot of people's credit on the books too.
Government gains an asset through nationalisation.
People forget this when they talk about the 'cost'.
What's the value of the "asset" in this case? Its just a middleman between the generators and customers that makes marginal profit for their trouble. That's why nationalising only that part is a hiding to nothing.
Reform of the wholesale market, on the other hand, would stop penalising renewables for their distance from "the market" (ie SW England) and also allow cheaper sources of energy to mitigate against gas generation costs.
Nationalise the generators and you have the market rather than the service.
Government gains an asset through nationalisation.
Of an energy supply company that's never made a profit? seems scant return.
Of an energy supply company that’s never made a profit? seems scant return.
Then the *competitive* suppliers market shouldn't exist in the first place because then government doesn't need to make profit to serve its customers.
It's not a immediate return it's just something to stick on the balance sheet - it can generate employment too. It's of some value to society.
Especially if the whole lot is centralised and is one big purchaser.
(Bulb made 180 million gross in 2020 and employed 1000 people.)
Government gains an asset through nationalisation.
People forget this when they talk about the ‘cost’.
Unless it steals the asset from the shareholders it gains an asset at the expense of increased national debt. Or takes over a lossmaking "asset" and thereafter needs to cover the annual losses.
Then the *competitive* suppliers market shouldn’t exist in the first place because then government doesn’t need to make profit to serve its customers.
Correct, they shouldn't. It was always just a competition between them to see who could administer a purchasing and billing process for the cheapest cost, and however cheaply they did it was still a layer of bureaucracy that the end customer needs to pay for.
Unless it steals the asset from the shareholders it gains an asset at the expense of increased national debt. Or takes over a lossmaking “asset” and thereafter needs to cover the annual losses.
1) Increased national debt is of no significance to the average punter. It's not a debt the government pays back in the same way you or I do. I've done hundreds of posts explaining this.
2) Some of these shareholders have had a good run - and given the companies aren't making money - it looks like the gamble of being a shareholder is not paying off now. That's the risk you take.
Bulb is already propped by the government - I bet the shareholder's were very pleased with that actually as opposed to going bust.
There's only a tiny amount of individual share holders - mostly big investment firms that only existed to drain money.
Maybe if you’re a shareholder with SSE, OVO or such but otherwise it isn’t actually fixing anything. The prices are a symptom, if you just treat that then the problem will never be solved.
Agreed, but I'm not talking about long term solutions here, the clock has been ticking for some time and will bring real people to a crisis point within the next few months.
With a zombie government no meaningful action has been taken and when the season changes it will be too late. Share buyouts and government bearing the losses will only be a sticking plaster to see us through to Q2-23' maybe, but it is something Liz could enact on day one (I doubt she will though)...
Longer term I'm still a believer in wholesale re-nationalisation of the UK's energy sector, but I accept that is both complex and well beyond the ideological boundaries of a Tory government, it would mean doing the deals to take both loss making and profitable organisations into national ownership some shareholder's will jump at the chance to offload losses, others will want to hold onto a golden goose. it would also essentially be a tacit admission that the free market has failed at something, unthinkable for some I know...
The other, longer term, but very important, project needs to be UK energy security, alternatives to imported gas, low or zero carbon sources. Various technologies exist already but investment is needed and yet again I am in favour of using public money to develop our national energy generation and distribution capabilities, as once it slips into private ownership we'll be heading towards escalating prices and minimal reinvestment yet again...
Increased national debt is of no significance to the average punter. It’s not a debt the government pays back in the same way you or I do.
I must have missed those. Explain it again. As far as I am aware the govt has huge debt interest payments in it's budget every year. Borrow more those payments go up. Or do they?
https://news.sky.com/story/national-debt-interest-payments-rise-to-record-70bn-12599336
Blimey, things must be getting really serious when the Daily Mail starts sounding all leftie and riling up against greedy and incompetent bosses.
"But the actions of 31 energy company bosses have added to the burden – since the billions needed to bail them out when they went bust is being heaped on to bills.
MPs last month concluded some bosses filled their pockets while running up debts and not taking steps to protect their firms from volatile wholesale prices.
By not ‘hedging’ against rises, the suppliers saved themselves hundreds of millions of pounds. Much of this was taken out in eye-watering salaries and dividends".
I can't believe I read that in the Daily Mail. It is hard to imagine a situation more ripe for exploiting by the Opposition, with even the Daily Mail now denouncing greedy bosses.
We live in strange times!
I wonder if it's just when price hikes start to hit the pockets of the 'better off' .. Then things might start changing.
I must have missed those. Explain it again. As far as I am aware the govt has huge debt interest payments in it’s budget every year. Borrow more those payments go up. Or do they?
Well firstly they're not really debt payments as such.
Off the top of my head there is about 2.4 trillion of so called 'debt' - bonds issued that are matched to the deficit spend. So that is 2.4 trillion that the government has spent into the economy that has not been taxed back. It's just a counter of government spend.
Note: the government spends first in this sequence. It then issues bonds to the private sector to match deficit spend. The spend has already place. It doesn't need to borrow money to make the spend. It issues bonds to help control interest rates from money entering the system. Bonds are a drain of reserves out of the private sector to make way for the new spend. The money the bonds are purchased with in the private sector is largely money already spent by the government that has made its way through. So we call this a swap of reserves from non interest bearing money to an interest bearing asset - the 'debt' as we like to call it.
Next - out of that 2.4 trillion the BoE owns roughly 40% of the debt or bonds through Q/E. So in affect a debt to itself.
So what about the interest payments - well the government can always meet its obligations it's the currency issuer.
It actually sets the rate at auction and always meets the payments.
So the *debt* payment is never an issue. If it is a problem the government can create the money to pay it.
And finally given where we are with inflation the interest payments are likely inflated away to a degree so the bondholders (of the 'debt' lose out.)
Hopefully that covers it. The limit or number of the debt itself is largely irrelevant it's just a scoreboard of money transfer from the public purse into the economy.
So when you hear debt as % of GDP as some sort of limit - ignore it - it's a useless metric in this context.
The limit of government spending is excessive inflation caused by too much money being spent and not being absorbed by the economy - which can be controlled by taxation (deleting the cash.)
However inflation can be caused by supply-side shocks too so this can create a complex picture as we have now. Only a small percentage of current inflation is/was being driven by money - and that was a blip whereas the supply-side inflation takes longer to fix.
Next – out of that 2.4 trillion the BoE owns roughly 40% of the debt or bonds through Q/E. So in affect a debt to itself.
The bonds are UK Government bonds held by financial companies and bought by the BoE using £££. The value of UK bonds bought through QE is an eye-watering £895bn. That amount has increased year-on-year since the first QE purchase in 2009 and we've never "sold" any of that debt. This simply isn't sutainable because as the quantity of £££ increases so do prices and inflation; the value of money is determined by the amount in circulation
@rone
What do you mean by "by supply-side shocks"?
There is a school of thought that macro-economics is about actions rather than shocks
That amount has increased year-on-year since the first QE purchase in 2009 and we’ve never “sold” any of that debt. This simply isn’t sutainable because as the quantity of £££ increases so do prices and inflation; the value of money is determined by the amount in circulation
The BoE owns the debt the government issued.
I've no idea what conclusions you are coming to with Q/E. Sorry.
The BoE created the money to purchase them. It's a standard operation.
This last round of Q/E was done when the government created the covid package as a back door way to do the borrowing/bond issuance.
The previous rounds of Q/E were different and provided liquidity.
This simply isn’t sutainable because as the quantity of £££ increases so do prices and inflation; the value of money is determined by the amount in circulation
No it's not. The pounds value is not pegged to anything and the value is determined by the markets. It's a floating currency.
Japan and US both do Q/E too.
There's talk of unwinding but it's not necessary.
What do you mean by “by supply-side shocks”?
As in - what just happened with just-in-time supplies/shortages/supply chain issues during the covid period.
It's well documented.
I’ve no idea what conclusions you are coming to with Q/E. Sorry. The BoE created the money to purchase them. It’s a standard operation
The BoE view QE as a "standard operation" as well, however the House of Lords Economic Affairs Committee published a report in July 2021, "Quantitative easing: a dangerous addiction?" https://publications.parliament.uk/pa/ld5802/ldselect/ldeconaf/42/4203.htm#_idTextAnchor001
Mervyn King, a member of that committee was Governor of the BoE from 2003-2013, a Member of the BoE Monetary Policy Committee, which instituted quantitative easing in 2009. He's also a School Professor of Economics at the London School of Economics and Professor of Economics and Law at Stern School of Business and School of Law at New York University
.
The BoE view QE as a “standard operation” as well, however the House of Lords Economic Affairs Committee published a report in July 2021, “Quantitative easing: a dangerous addiction?”
If Q/E is put to good use then it's not in the least bit a dangerous operation. These guys like to keep the charade the BoE can't directly the finance government spending. That's all that's going on there.
The alternative is that Covid sunk the country without this support so they're talking rubbish.
