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Can’t pay, won’t pay… and you can’t make us

Britain is approaching the final stage in its energy death spiral.  A combination of increasing delivery costs and lower real-terms incomes has been accelerated by greater degrees by Brexit, two years of lockdowns and the severance of imports of oil and gas from Russia.  At the same time, the previously unforeseen consequences of a quasi-market in energy are coming home to roost in the shape of volatility which has seen prices go negative on particularly windy days only to rise to last month’s record price of £9,724.54 per megawatt hour.

No doubt most of the commentariat will engage in the usual neoliberal left v neoliberal right finger pointing as each tries to blame the other for the current state of affairs.  In reality though, both are guilty of the fundamental error of putting ideologues in charge of critical engineering projects.  The ideologues assured the politicians that switching from fossil fuel to “green” electricity generation was simple – all that was required was political will and a large enough corporate welfare trough to feed a new green industrial complex.  And so, Britain became a world leader in deploying wind turbines – building some of the largest offshore windfarms on the planet.

There were though, two dirty secrets.  The first was that the promised storage technologies had failed to put in an appearance, so that the system had become increasingly dependent upon gas generation to iron out the intermittency in wind.  This was not seen as a problem by the Labour government which created the quasi-market in electricity, because Britain was an exporter of natural gas.  This came to an end in 2005 though, after North Sea production had fallen 60 percent from its 1999 production peak.  And although British politicians claimed not to be dependent upon Russian gas (most of Britain’s gas comes from Norway) they overlooked the fact that British generators still had to buy gas on the international wholesale market.  Thus, as we have found out to our cost in the past year, if European gas prices rise, so too do British prices.

Britain’s second dirty secret is that rather than expand domestic fossil fuel generation as the only alternative to power outages, politicians chose to offshore the fossil fuel use to Europe – building interconnectors to the European grid which now provide more than ten percent of Britain’s electricity.  This supposedly makes Britain’s electricity grid more secure.  In reality though, it makes us vulnerable to crises anywhere on the continent… when Europe chooses to eschew Russian gas, it is British electricity consumers who face unpayable rises in their bills.

In practice, coal has been the big loser in energy policy up to now.  All but two of Britain’s coal power stations – which, in any case, depended upon imported coal – have closed and most have been demolished, so there will be no going back.  But it was gas rather than wind which replaced coal.  There has never been a month when wind has accounted for more than 40 percent of our electricity, despite our advantageous location beneath the Gulf Stream and the Jet Stream.   Indeed, wind has only ever exceeded gas once – February 2022.  More often, wind struggles to provide more than a quarter of our electricity, and at worst – during cold, high pressure weather systems – wind can fall below a fifth of our monthly electricity generation.

Our woes do not end there either.  As governments have sought to shift away from fossil fuels, Britain has become increasingly dependent upon an aging fleet of nuclear power stations to provide a steady baseload of some 15 percent of our electricity.  But these nuclear plants are at the end of their working lives and are now being decommissioned.  Most recently, Hinkley Point B – Britain’s biggest producer of nuclear electricity – has closed, taking around three percent of UK electricity generation with it.  Worse still, proposed replacements – Hinkley Point C and Sizewell – which were intended to provide some 10 percent of UK electricity by 2030, are on hold due to “design flaws” (not something you want to learn when it comes to nuclear power) making us even more reliant upon gas (and possibly coal?) for decades to come.

One reason why we have arrived at this sorry state is the neoliberal assumption that economic growth – and thus rising incomes – is a given.  The higher price of new nuclear, of imported electricity from Europe and of LNG from Qatar might be an issue today, but as incomes rise, so the sunk costs become easier to handle.  This was one reason why, for example, the cost of “green” subsidies was added to (regressive) electricity bills rather than being covered by (progressive) general taxation.

What none of the architects of the current mess were prepared to entertain was that the peak of conventional – i.e., cheap and easy – oil production in 2005 would trigger the financial equivalent of a cardiac arrest in 2008 which has been followed by a depression on the scale of the 1930s in which most incomes have fallen in real terms, and GDP growth has lagged far below its pre-2008 trend.  And that was before the technocracy decided that locking down economies and breaking fragile and complex global supply chains was a good idea, or that disconnecting gas-powered economies from their supply of gas would make for a clever experiment in “green” living.

Like nuclear before it, renewable energy was supposed to provide us with “electricity too cheap to meter.”  Like nuclear before it, it has resulted in electricity so eye-wateringly expensive that the European continent – including the UK – is introducing energy rationing and turning to churches, libraries and gymnasiums to act as “public warm spaces” this winter in an attempt to prevent thousands of deaths from hypothermia.  Even then, the cost of such previously taken for granted essentials as being able to cook food, wash in warm water and at least to occasionally wash clothing remains so high that those in the bottom half of the income distribution face the hard choice between heating and eating this winter.

The response of the government and the technocracy is, frankly, delusional.  The candidates to become the next UK Prime Minister are talking up various microwaved versions of austerity for the poor and socialism for the rich in the pretence that bankrupting the population will lead to some miraculous revival of Britain’s economic fortunes.  Meanwhile, the central bank has decided that the best response to the population not being able to afford such basics as light, warmth, and food, is to raise interest rates so that these essentials become even less affordable.

This is not merely a threat to those whose incomes can no longer cover their spending.  The entire economy is at risk as people are obliged to shift their spending to essentials and away from discretionary items.  This is one of the few things about the economy that Marx got right – although he worded it wrongly – we are now in a crisis not of “over-production” but of under-consumption.  As economist Richard Murphy explains:

“Like so much of life, the economy is very fragile. It can seem almightily powerful to most of us, most of the time. But that is not really the case. The whole modern, western economy of which we form a part is heavily dependent on several key things happening.

“The first of these key assumptions is that people will continue to buy most of what companies make available to us to buy, on which those companies spend a fortune in advertising so that we will part with our income to benefit them.

“We, and they, just assume that this will carry on. And when prices were fairly stable, savings fairly predictable, and employment was reasonably secure that was a fair assumption to make…

“The essential assumption that what there is for sale in our economy is sold might, very soon, no longer hold true for the simple reason that people may not have the means to pay for what is on offer. The trend is already apparent: consumer sales are falling.”

As most of what remains of national purchasing power has to be spent on essentials, the greater part of the economy which provides all sorts of non-essentials from meals out and holidays abroad to health spars and TV subscriptions are starved of cash and forced into bankruptcy.  Thousands – and likely millions – of people are left without jobs and forced to fall back on a badly broken social safety net.  At the same time, the charities – such as foodbanks and debt advice agencies – which form part of that safety net are unable to function due to falling donations, fewer volunteers and far greater demand.  And this becomes a vicious downward spiral, as each round of unemployment further lowers consumer spending power, causing even more bankruptcies and lay-offs.

This is, of course, exactly the crisis which the central bankers are trying to engineer in the unfounded belief that a crash in demand will cause prices to fall.  Their conceit is that they can somehow manage the process so that they can inject additional spending power into the economy just at the point that prices have stabilised.

It is certainly true, in an entirely unhelpful way, that if demand is crushed enough, then prices will fall.  If, for example, only five or ten percent of us remain able to afford a car, then demand for petrol and diesel will fall to the point that oil supply temporarily exceeds demand once more, and prices fall accordingly.  However, because we are firmly on the downslope of the oil age, with production falling with each passing year, eventually even the wholesale destruction of our economies will not prevent oil from becoming unaffordable.  And where oil goes, everything else follows, simply because oil is an essential input – either as a fuel or a feedstock – to almost every good and service we produce and consume – including essentials like food and heating.

Most likely, instead of managing a smooth economic landing, the central bankers will help to generate a crisis which will make the 2008 crash look trivial.  Not least because there is a gathering discussion of a form of public dissent which, if it materialises, will be devastating – a mass non-payment campaign.

This form of protest was partially successful in the late 1980s and early 1990s in preventing the introduction of Thatcher’s Poll Tax.  A network of anti-poll tax unions was built up in communities across the country to clog up the implementation and enforcement of the tax.  They were partially successful insofar as the Council Tax which the government eventually implemented was not as punitive as the poll tax.  Then again, Thatcher had deliberately framed the poll tax legislation so that non-payment was a criminal rather than a civil matter.  This allowed much faster enforcement through the magistrates courts, which had been given additional resources to fight the non-payment campaign.

As was the case then, the official opposition today are of slightly less use than a condom in a convent.  So, any organised non-payment campaign will have to come from organisations outside the political mainstream.  And, given what we have seen across Europe in recent years, this means that the populist right is just as likely to front up such a campaign than what remains of the old left.

Even without a formal campaign though, it is likely that tens of thousands of households are not going to be able to pay their way this winter.  In considering what this means, we should think of debt as having a hierarchy similar to Maslow’s hierarchy of needs.  As far as possible, people will attempt to pay their housing costs because of the threat of homelessness.  But they will feed themselves first.  If they haven’t already cancelled them, they will most likely default on subscriptions and leasing agreements – something that will be catastrophic for businesses like health clubs and TV services in addition to the second-hand car market.  Council tax and energy bills are likely in the second tier of items to default on, even though utility companies and local authorities are far more adept at bringing defaulters before the courts.

Here though, is an advantage which people not paying their energy bills this winter will have over the people who didn’t pay the poll tax in the early 1990s.  One of the unforeseen consequences of two years of lockdowns is that Britain’s already underfunded civil courts have a massive backlog of cases.  As Damian Bradley explained recently:

“Court delays have been worsening for several years. Local courts have been left to crumble and eventually close, forcing clients to travel further to attend a court that is still in operation and putting those remaining courts under further strain as they are allocated more and more claims to deal with.

“Clients may be surprised to learn that even before the pandemic struck, the time taken for a standard claim to reach a final hearing had slipped by at least an extra three months when compared to the previous year. This is according to government statistics. These delays cannot be blamed purely on Covid-19.

“The result of the year on year increase in court delays is a massive disruption to the UK justice system. The backlogs are holding up thousands of cases and making claimants feel helpless. New figures released by ACSO, based on our analysis, show that having your case seen by a Judge within a reasonable timeframe has become a postcode lottery, with some county courts taking twice as long as others to resolve a case…”

These are the same courts which the energy companies use to begin proceedings against late-paying and non-paying customers.  Usually the process is automated, with all of the summonses issued from a single court – although anyone receiving a summons has a right to have the case heard in a more convenient court.  With the courts already clogged up with legacy cases, even the normal volume of summonses results in delays.  But in the event of tens or even hundreds of thousands of new cases following a winter of non-payment, it might be several years between an energy company issuing a summons and finally getting a judge to make a ruling.  And even then, there is no guarantee that the judgement will favour the energy company.  Commonly, for example, such judgements can involve a relatively small attachment to someone’s income, so that it might take years for the debt to be repaid.

The broad point is that energy supply companies face a huge threat to their cashflow at a time when the normal processes for responding to this are unavailable.  And contrary to the mythology on the neoliberal left, while energy corporations as a whole are making enormous profits, their supply divisions or subsidiaries are not.  One consequence of widespread non-payment, then, could be the voluntary withdrawal from domestic energy supply entirely… the predicted end point of the energy death spiral.  Either government will be forced to bail out energy customers or they will be forced to nationalise energy… probably both.

As you made it to the end…

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