Even the PM is bamboozled by energy companies. Is state ownership the answer?

Columnist

Sunday 21 October 2012

PRICE comparison websites: who needs them?

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Iain Macwhirter

You'd have to be pretty dumb to pay more than you need to pay for energy, wouldn't you? Well, let me put my hand up and say that I hardly ever look at my bills, and until the day before yesterday I couldn't have told you what company I was with. I suspect I am not alone. Why don't I complain? Why don't I switch? Because life is just too short.

Shop around? I gave that up long since, when I discovered that the prices are deliberately incomprehensible to those not versed in the science of ballistic propulsion. Imagine if you arrived on a petrol station forecourt and were offered more than 400 different prices. It is confusion marketing – a systematic and deliberate attempt to obscure the true cost of energy.But here's the twist: the one thing I do know is that I am probably paying a lot less than families who are worse off than me because at least I can get an internet rate and pay by direct debit. One-third of Scottish families are in fuel poverty, meaning that they spend more than 10% of their income on heating their homes. Actually, my energy company seems to have given up heat and light and seems to be running some weird kind of bank into which I make arbitrary but compulsory deposits. Looking at some of my bills recently I discovered that my balance had gone to –£610.45 from –£418.45 in the previous period. What did that mean? Apparently that I was in credit. Which means the company is earning interest out of the £400 I had somehow left in their Bank of Bamboozle. Nice.Phone companies are just as bad, in fact worse. I dumped one telecom company a couple of years back when, bewildered by the blizzard of numbers on my bill, I rang a nice lady in Bangalore and asked exactly what I had paid in each of the months indicated. She told me I didn't have the right to know that, only my credit balance. And don't start me on those iniquitous phone charges – the 0845 and 0847 numbers that you think are cheap because Government agencies use them, but of course are not cheap at all. But I digress. Confusion marketing has dominated energy supply for the last 20 years for one obvious reason – noted by Adam Smith more than 200 years ago. "People of the same trade," said Scotland's greatest economist, "seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."I don't know about merriment but all those foreign-owned energy companies were certainly running a conspiracy. Hence their telepathic ability to move their prices up in unison, and somehow never bring them back down again.This is appalling and David Cameron is right to call a halt to it. OK, he didn't actually put an end to it – he only said he'd legislate to ensure that every consumer got the best tariff for them. Although no, he didn't quite do that either. The energy watchdog, Ofgem, went some of the way on Friday when it ordered the energy companies to come clean on their tariffs, make clear which are the cheapest rates, and ensure that customers, when they come to the end of their "offer" rate, are put onto the lowest tariff available to them. But I forgive the PM for being confused, because everyone else is. However, it would be naïve to think that these belated regulatory measures will end the problem of confusion marketing, which is alive and well across the range of utilities, supermarkets, pension funds, banks etc. They're all at it: screwing the consumer. Look at the profiteering on the railways. Every year about this time I have a spat with ScotRail over their £21 "anytime day return" fare for the 80-mile round trip from Glasgow to Edinburgh, which a four-seat Citroen C3 can do on one gallon for the cost of £6, or £1.50 per passenger. They always tell me that "hardly anyone" pays full fare. I tell them that I do. The privatised rail and utilities companies have achieved what everyone believed impossible: made the country nostalgic for nationalised industries. No, British Rail wasn't exactly an enjoyable way to travel; British Gas was inefficient, consumer unfriendly and slow; and it is impossible to imagine the old GPO, as it used to be called, selling smartphone contracts. (Mind you, the old state monopoly might have made a better fist of the broadband and wifi networks. My father worked for the GPO and was responsible for laying transatlantic telephone cables, so they weren't as dumb as everyone thinks, and there was an ethos of public service which is hard to imagine today – except, interestingly, in the case of the founder of the world wide web itself, Sir Tim Berners-Lee.)The problem with the old state monopolies is that they became state bureaucracies, dedicated to defending their narrow interests. They were incapable of the kind of flexibility and innovation that you get with the best of consumer markets. Could you imagine state companies developing the iPhone or the iPad? We would still be using valves. But it is becoming increasingly clear – and not just on the left – that state ownership will not go away and indeed is perhaps becoming more relevant today than at any time over the last 30 years. We are beset with commercial organisations that are too big to fail, too big to bail, too big to trust, and the state is getting ever more involved in managing them. Large sections of the banking industry have become unstable and rapacious monopolies and, in the case of Royal Bank of Scotland and much of Lloyds Banking Group, have fallen into state ownership. Large sections of the rail network, including the East Coast mainline franchise, and track-and-stations owner Network Rail, have come boomeranging back to public ownership. And following the West Coast mainline bidding debacle, Labour is now talking about re-nationalising the entire rail system. If there is to be a new generation of nuclear power stations, it looks as if the state is going to have to finance it because the private sector just doesn't want to know. As the financial crisis morphs into an economic depression, the state is having to intervene in the economy in ways that would have horrified Margaret Thatcher. But this is exactly what happened in the 1930s. The rail system was run by inefficient private companies which couldn't generate the necessary investment. Technological developments in telecommunications were hampered by the need for private companies to put shareholders first. And of course, the private health service – unreliable, expensive and slow – was unfit for purpose and had to be replaced by the NHS, which some say has the same faults, but is actually the cheapest and most efficient national health provider in the world. With the eclipse of socialism, state ownership is no longer seen as a political programme: a means to expropriate the capitalist class and build communism. We know that didn't work. But pragmatists are realising that state ownership is the only solution for many areas of economic activity. Unfortunately, the UK's energy companies are now mostly foreign-owned, so renationalisation is impossible. And guess what: much of our systems are owned by foreign state energy companies such as France's EDF. Nationalisation hasn't gone away, it's just gone abroad.

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Even the PM is bamboozled by energy companies. Is state ownership the answer?

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