Taken Up Avidly

Michael Meacher is much maligned. Here is one of the reasons why:

Peter Mandelson has criticised Labour's proposed gas and electricity price freeze. "Perceptions of Labour policy are in danger of being taken backwards," he said.

But when energy prices have risen 50% in the UK in the past five years – nearly five times general inflation – and with UK energy prices now soaring faster than in any EU country and four times faster than in Germany, it is clear that the Big Six companies have too much power and are abusing it. Unfettered market power must be balanced by the consumer interest and the broader public interest.

Energy company profits more than doubled in the past year to £3.7bn, propelled by the fact their charges shot up by an average 8.4% at a time when prices generally were rising by just 2.8%. Nor did the Treasury gain from these profits. Three of the companies paid 10% or less of their operating profit in corporation tax, and one paid almost none at all over the last three years.

The pay of chief executives has not been disclosed by half the companies, but Sam Laidlaw, the boss of Centrica –which owns British Gas – was paid £5m last year. At the same time there are at least 4.5 million people in the UK in fuel poverty, spending more than a tenth of their total income on fuel.

The energy market is badly broken. The big six control no less than 98% of the retail market, and price competition is almost totally stifled. When one company raises its energy prices, the rest follow in lockstep.

Details of gas and electricity prices paid in the wholesale markets are kept firmly under wraps by the companies, but evidence suggests costs to the consumer are quickly jacked up when prices in the international market are rising, but sticky when the latter fall back ("rocket up, but feather down", as Ed Miliband said in his speech this week). And consumers are confused, perhaps deliberately, by an array of up to 1,700 energy tariffs: almost three quarters end up on the most expensive ones.

Nor has regulation worked. There have been dozens of Ofgem investigations into the energy market, with little or no impact on the fairness to consumers, either in price restraint or ending poor service and mis-selling.

It is ironic that the big six cartel is screaming so loudly about a temporary price freeze and threatening disruption of energy supplies, when it is itself so dependent on subsidised support from the government.

EDF Energy, for example, is currently negotiating over a price to be guaranteed by government for electricity from new nuclear plants so that, if the market price falls below a certain level, a surcharge to customers' bills will automatically kick in.

Well before Miliband proposed this limited freeze, energy companies were raising the spectre of the lights going out – even though peak demand has been declining in recent years – if they didn't get the terms they demanded from the government (ultimately, of course, paid for by consumers).

The real threat of disruption to supplies comes from a rigid oligopolistic market structure and a short-termist mindset among industry leaders. Billions have gone to shareholders and top management remuneration rather than being invested to fill the energy gap predicted for the end of this decade.

And the issue goes a lot wider than energy pricing. It opens up the critical divide between those who believe "Let the markets get on with it, and government get out of the way" (such as the Tories, Orange Book Lib Dems, Blairites like Mandelson, and pretend-Labour ex-ministers like Digby Jones), and those who believe that when a private market is utterly dysfunctional and broken, the state has to step in and re-set the rules.

That could apply not just to the energy sector, but a great deal else – housing, to pensions, rail transport, water and, of course, the banking system.

Miliband's opponents are up in arms because they see this as a challenge to the untrammelled corporate power that has dominated for 30 years.

And maybe they're right. Following the financial crash of 2008-9, a new system has to be created. A temporary price freeze may be just the first element. 

And here is another:

Ed Miliband’s speech yesterday was arguably the best speech a Labour Leader has ever delivered to Conference – certainly in my lengthy political lifetime.

Not only delivered with a Leader’s assurance about himself and his goals, what shone through was his obvious empathy with ordinary people and their plight and his telling use of his own human encounters to make his political points.

But of course what was equally impressive was that the speech was packed with radical commitments, like no other Leader before has ever done. He is slowly but relentlessly reversing the ideological tide which has flowed to the right for almost the last 40 years.

The financial crash of 2008-9 was a turning point equivalent to 1945 and 1979, but unlike those two previous pivotal events the cataclysmic crash of 2008-9 was never followed through by those who should have used it to leverage in a new era.

That challenge is now being taken up avidly by Miliband.

Building 200,000 homes a year by 2020 plus charging developers escalating fees for sitting on land but not building on it, freezing gas and electricity prices, giving a £800m tax break for small businesses at the expense of large ones, and bringing together health and social care in a restored and fully integrated NHS are all big and ambitious commitments.

They all have a common theme – taking the side of the disadvantaged against the vested interests.

It’s not that the Labour Party under Blair and Brown tried to do such things but failed; it’s rather that they never even tried because they sided with the vested interests.

In the last analysis politics is all about whether you’re on the side of the powerful or the powerless, and for Blair and Brown there was never any question but that that meant shamelessly placating the rich and powerful with only the minimalist concessions to the victims and only what the neoliberal capitalist market system could happily live with.

However, despite Miliband’s powerful and impressive speech yesterday, some big questions remain. One is: how is Labour going to deal with austerity in 2015? Trying to reduce the deficit by cutting government expenditure is counter-productive because it shrinks the economy.

Will Labour finally adopt the right way, which is expanding the economy through public investment and job creation?

Another big question is: if Miliband is determined to raise living standards for everyone (‘for all the boats on a rising tide, not just the yachts’), that can only be done when our balance of payments is stabilised.

At present we are consuming vastly more than we are earning – last year our imports of goods exceeded exports by over £100bn a year, and the gap is still rising.

That means making fundamental reforms of the institutions and structures which are so badly letting down Britain – the banks, manufacturing capability, changing the balance between the markets and the State, and the obscene level of inequality.