Energy Price Hikes - Unavoidable?

 

On the day of the biggest hike in domestic fuel prices ever experienced in my lifetime, it’s interesting to probe a little to try to understand what factors underly it.

 

 

In a recent article, Richard Murphy, political economist and professor of accounting practice at Sheffield University, reasoned that pretty much all of the increase is attributable to speculative advance purchasing by energy suppliers rather than to any actual shortage, or increase in the production price. This has the effect of vastly increasing supplier profits (and presumably shareholder dividends).

With UK electricity and gas production and distribution now being entirely outwith government control the only lever UK Government has over retail prices is the price cap calculated by Ofgem.  The amount of the cap is linked to the wholesale prices of gas and electricity but, as Richard Murphy argues, the surge in wholesale prices is not because of any shortage but rather because of widescale advance purchasing increasing demand.  Today, the cap has risen by 54%.  In contrast, The French Government, which has an 85% stake in EDF, has limited the price increase to 4%.  

Ofgem also sets grid connection charges – how much energy producers are charged to connect to the national grid.  Interestingly, there are three connection rates in UK - £7.36/MWh in the north of Scotland, £4.70/MWh in the south of Scotland and £0.49/MWh in England. Odd, or perhaps just opportunistic for UK Government, when over 65% of North of Scotland renewables production is exported to England. (Business for Scotland Blog – March 2022)

Daily standing charges are also increasing.  These, as you’ll be aware, cover the cost of providing meters and maintaining the distribution network. They also include costs associated with energy suppliers going out of business.  Individual supply companies set their own standing charges up to a cap set by Ofgem.  The reality is that nearly all have opted to charge at the capped rate. Regional variations in the cap however result in standing charges varying considerably across UK, from 31p in London to 49p in the south-west of England, just ahead of North of Scotland’s 48p.  Ofgem attributes these differences to a reallocation of network costs which vary between distribution networks.  (BBC News – March 2022).

I can’t see how people on tight budgets are going to cope with increases of this scale and the resulting pressures are bound to have an impact on UK politics. It's quite remarkable that we've ended up in a situation where the cost of drawing on some of the basic needs of life becomes untenable for many in a dynamic which directly benefits shareholders, and does so handsomely.  This needs to be addressed.

 

UK Government is a money creator. It doesn't borrow, it prints money when needed.

The government can instruct the Bank of England to issue funds, and could use those funds to alleviate hardship. It did so to finance the Furlough Scheme and "eat out to help out".  Now it It chooses not to - a politcal choice, and a recessionary one like that favoured by David Cameron and George Osborne. It needn't be this way.

Oh, by the way, while we've been proccupied with Covid and overseas matters, UK Government has just quietly done a deal to sell a major stake in the entire gas network, including that within Scotland, to an Australian mining company.  Part of the trade deal so proudly proclaimed by Liz Truss no doubt, and the very antithesis of "taking back control."  The prospect of Austrailian mining interests taking a benign and humanitarian approach to hard-pressed British consumers is one which, to me, defies logic.

Immigrants. Immigrants Everywhere.

I've just returned from a hugely enjoyable few days in London and am struck by the huge numbers of immigrants.  Immigrants everywhere.

It started when we checked in to our hotel: a reception desk manned entirely by immigrants.  Not a British staff member in sight.  Smiling, polite, personable and efficient staff - but none the less immigrants. Then, venturing out to explore surroundings, it seemed almost impossible to find an eatery without again encountering immigrants.  Immigrants everywhere.  They now seem to own the smaller individually owned restaurants we like and employ other immigrants as staff - again smiling, polite, personable folks and generally much more efficient than typical British waiting staff I've encountered, but immigrants for all that.  Granted, the fare on offer was generally superbly prepared with fresh ingredients and attractively served with a smile in clean, pleasant ambient surroundings but - by immigrants.  They seem to man the shops everywhere too, generally with a pleasant engaging and personable demeanour but - they're still immigrants.

I suppose, if they're employed or are business owners, they'll be contributing to our tax revenues but - they're still immigrants for all that.  They'll be calling on our nation's resources.

Thankfully, the one place where these immigrants were in the minority was at Gatwick Airport, There, foreigners were vastly outnumbered by genuine born and bred British folks en-route to their holiday destinations.  Brash, loud and generally with very little in the way of grace or dress sense, but British through and through.  There were immigrants manning the security hall and catering businesses, but those immigrants were different - generally sullen and unsmiling.  They seemed to respond with little natural grace, I thought, to the grudging sullenness of those never-ending numbers being subjected to security or the unsmiling demands for fast food or alcohol often devoid of a basic "please" or "thank you".  They took little pride in their surroundings, apparently content to thole cluttered dirty tables and waste food and spilled drinks on the floor.  That's immigrants for you.

Heading Confidently Into The Past

I found today's TV news lead item oddly disturbing.

 

                                                                                  Picture courtesy of CNN


As China and India, with between them a huge part of the world's population and previously the lead polluters on the planet, now invest hugely in renewables and understand that education is more than a means to earn a living but rather the key to national transformation, we in the UK seem to have enthusiastically jumped back 30 years.

I don't want to be dragged in this direction. 

Brexit and the English Angst.

One of the key lessons I latched on to at school was that the rights and freedoms of the British people, given the lack of a formal written constitution, were guaranteed by the Separation of Powers, and thankfully the Supreme Court upheld that principle today.  The Government's role is to execute decisions taken by Parliament, after due process, not to take those decisions on Parliament's behalf.

So Parliament will now debate whether or not the UK leaves the European Union.  In doing so it must surely bear in mind and be guided by the result of last year's Brexit referendum.  I don't see that Parliament can legitimately overturn that result, but there should be an opportunity for reasoned debate and scrutiny, which is clearly necessary for such a significant decision.  If our elected representatives are wise, they will also weigh up the stark variations in the referendum result between the English part of UK on the one hand, and the Scottish and Northern Irish parts on the other, served as they are by devolved assemblies.  Wales, as we know, like England voted to leave.

Analysis of the referendum result vividly exposed a UK divided by age, education and class.  The outcome was essentially decided by folks who felt neglected and disenfranchised - folks who felt isolated and detached from the political process - and not by any sustainable reasoned case for the claimed advantages.  So many of the assertions of Nigel Farage and Boris Johnston don't stand up to scrutiny. (See Professor Michael Dougan here.)  Should we really let our destiny be decided by mistruth and opprobrium?

I remain open to the possibility that Brexit might serve Britain well, but I need to be convinced by reason.  I want to hear reasoned debate and cross-examination, not bold assertion and shouting down of contrary views.  Scant regard seems to be paid to the non-economic consequences.  Quite possibly a disintegration of the European block will be triggered at a time when USA seems intent on becoming increasingly isolationist, Russian imperialism is vigorous, and unrest and instability are rife thorough most of the Middle East.

But let's consider again those folks in England who felt detached from any ability to influence their destiny. Would they have voted differently if, like Scotland and Northern Ireland, they had been represented by a national assembly or parliament?  Would we be where we are now with Brexit had there been an English Parliament?  Isn't there a clear and pressing need to separate Westminster's role in governing the UK and its international relations on the one hand from its role in the governance of England on the other?  The establishment, in my view, of an English Parliament would at a stroke restore a measure of badly needed balance to UK politics, oblige the centre-right in Scotland to engage meaningfully at Holyrood rather than looking to Westminster to foster their interests (thus restoring that same badly needed balance to a Scottish politics currently dominated by the left) and give England some sense of the identity it is struggling to embrace - an identity which values England for its own undoubted intrinsic virtues, while acknowledging and respecting the differences, for they are fundamental differences, prevalent in the other British nations.

Despairingly Dull Election Campaign

This Scottish election campaign is despairingly dull.  It’s an insult to the intelligence of any Scot worth his salt.  With a few occasional exceptions, the party leaders have failed to inspire and the much-heralded television debates have consistently resembled the sixth year debating society.  The debates were devoid of engagement and questioning and amounted to little more than proclamation and sniping.  How can BBC Scotland hype up its election coverage as if it is going to be the most exciting thing to happen in ages?

Parliamentary democracy in the UK was designed to work by electors voting for individuals of calibre and worth, regardless of party.  That way we end up with a parliament capable of debating things with the benefit of experience and wisdom, and the result is strong, effective government and the advance of the national interest.  In the UK that, regrettably, has gone down the pan and we now vote for parties and not for worthy individuals.  Thus the focus on the leaders, like some gladiatorial contest.  The result is a downward spiral with low calibre politicians more concerned, given a maximum term of 5 years, to win power or, if in power, retain it, instead of working to create conditions which will advance long-term strategies in the national interest. Add to that the party managers with an eye to their careers and financial security, and an electorate motivated by self-interest, and you have the perfect recipe for national decline.

I had hoped, two years ago, that the Scottish referendum would have resulted in an opportunity to break away from that outworn and discredited UK politic.  I had hoped for an opportunity for imaginative folks of wisdom, acumen and experience to take a lead in forging a new dimension for Scotland.  We know however how that turned out.

Where is Scotland now?  Ever more centralist, ever more left-leaning.  This is not good.  All I hear are politicians focussed on what’s wrong and proclaiming what they want to do to resolve it.  Without real debate and cross examination these are just meaningless aspirations.  They smack of an appeal for votes from an uninformed and naïve electorate.  I hear no acknowledgement of Scottish successes and vibrant innovative economy.  This is a lamentably immature approach to politics and progression of the national interest.

If resources are directed into improving social housing provision, for example, or education, then it is transparently obvious that cash will be diverted away other programmes.  Either that, or taxes will need to rise.  What we need to know, Mr or Mrs politician, is not what you pledge to achieve but how it is to be achieved.  We need to understand the downsides, for downsides are inevitable.  We need to see a costed business plan which has been subject to due diligence.  Think of us, the electorate, as potential investors in your proposal.  You need to convince us that it stands up.  Are we Scots so gullible that we’ll vote for whichever party tells us it will give us what we’d like to see, without any reasoned path to delivery?

And where are the folks of wisdom in Scotland in the run up to this election?  I hear precious little acknowledgement of the vigour and success of the small business sector in Scotland which generates about half of the country’s GDP (source).  Ultimately business is the sole source of government finance (if we except cash coming from external sources).  It’s thriving business that creates jobs, and consequently tax revenues.  It’s the corporation tax, VAT and employees’ income tax flowing from business which funds government expenditure programmes, and it’s telling indeed that we’ve heard nothing in this facile election campaign about how to nurture and grow that source of revenue.  Where are the folks behind those businesses in these days before the election?

Is it the case that they feel it doesn’t matter because ultimately their interests are fostered by UK?  Do they feel, as I’ve heard folks say, that polite people don’t talk about politics?  I hear plenty of huffing and puffing about the perceived nastiness of the SNP - huffing and puffing by Scots who seem blindly hefted to the UK.  But, with a devolved Scottish parliament, those who are politically vociferous are having disproportionate influence, the political dynamic derives its power from that sector, and we’re moving steadily to a centralist regime which fails to acknowledge and encourage the dynamic localism and economic vigour essential for a healthy thriving democracy.

Which of the local candidates, which of the Scottish parties, will be capable of redressing this imbalance?    How should I vote on Thursday?  For the first time ever, I truly don’t know.  This is not a good state of affairs.

Scotland and the Greater UK

Britishness
As a child hatched into this world a few short years after the Second World War, I grew up with a strong sense of Britishness. There was a palpable feeling of improvement and of moving towards better times after wartime austerity. There was a coronation and a new Queen and a supreme sense of pride in being British. There was still a residual Empire and the Queen kept acclaiming the significance of the Commonwealth, with Great Britain as its central focus. Mr Churchill delivered statesmanlike speeches and Prime Minister Macmillan, in his rigid authoritarian and unmistakably British style, reminded us that “We’d never had it so good”.

To a child, Great Britain seemed supreme, and I remember feeling hugely proud to be British. Interestingly, then, the Conservative Party consistently won most votes in Scotland.

As the child became adolescent, Great Britain seemed to lose its magnitude and instead of the certainty of authoritative leaders, we had The Beatles, a vibrant young pop culture, Carnaby Street, mini cars and miniskirts and a general ceding of privilege in favour of the generation I belonged to – a generation which had never experienced war nor hardship.

Still the sense of Britishness prevailed, manufacturing industry was strong and, on the back of that, industrial workers felt strong allegiance to strong trade unions which were British-wide institutions. Utilities and railways were publicly owned throughout the whole of the UK and this, also, fostered a strong sense of cohesion.

The Britain I see now bears no resemblance to those earlier memories: There is clearly no Empire and at best a residual Commonwealth. Trade unions are weaker, British Rail has been privatised with ownership fragmented amongst a range of providers. The unspoken glue which cemented Great Britain together is no longer there and the Union flag seems associated with either far right extremism or the “long live Britain as a fair and pleasant land” folks. There seems to be no sense of cohesion, nor any vision of where we’re trying to get to. National pride and a sense of serving a greater whole have been replaced by acquisitive two-dimensional consumerism and self-interest.

Scottishness
To that child, being Scottish was incidental. We learnt at school that Scotland was a nation with its distinctive legal system, and institutions. But my parents, one from Liverpool, one from Perth, made no great play of it and the educational system played it down. TV portrayed Scotland as a quaint land of Brigadoon, The White Heather Club’s formulaic dancing, and Jimmy Shand Music, and Scottish actors were generally allocated quaint or eccentric cameo roles in the cinema. But the fact that the Royal Family holidayed here seemed to my young perception to lend the country some gravitas.

Contrast that with now, when Scotland is confident of its place and there’s a strong sense of identity and self-belief. Since devolution in particular there’s a real sense of politics being relevant and of being able to move things forward in a distinctively Scottish way. As Britishness has waned, it seems that the opposite has been the case with Scottishness.  

Scotland’s Place in The Union
History taught me that Scotland surged forward after political union with England, in terms of prestige and national wealth. Scotland was key in driving forward the UK's home and international interests. It was one of the power houses of Empire: It built the railways, the locomotives and the ships that facilitated transport and trade with the British Empire. Very largely Scotland advanced the inventions, innovation and scientific discoveries which drove Great Britain and the Empire forward. (Which is not to belittle Stevenson and Brunel and their worthy achievements). I'm reading a book at the moment about Thomas Telford, the engineer who planned and constructed countless projects across the UK, including of course the Caledonian Canal. I hadn't realised until reading it that Telford also build many of Scotland's fishing harbours. He was, as people will know, a Scotsman, but the reality is that that ambitious project roll-out was financed by the UK for the benefit of the whole UK.

On the back of that Glasgow became the second city of the Empire and Edinburgh developed its splendid Georgian new town. So how did a confident and expansionist post-union Scotland sink from that worthy role to the Scotland I knew as a child, an authoritarian country where folks are coy about exerting individualism, take comfort in a national mediocrity, and look for support from, rather than making demands of, the pubic agencies whose proper role is to implement our collective wishes.

A Wee Walk in the Braes of Balquhidder.

The weekend didn't get off to just the best of starts:  After arriving at our hotel in the gloaming, checking in, unpacking and generally putting our stamp on the room, I thought a wee walk before bath and pre-dinner drinks would be just fine.  It would stimulate the circulation and the appetite and consolidate the geography of our surroundings.

So, I emerged into the hotel courtyard to be met by the collie - a wonderful dog.  Totally unassuming, totally silent and with no desire to make bodily contact.  He was content to keep a distance of some 5ft. between us and seemed to like being a couple of feet in front as well.  He seemed to enjoy human company without the need to interact.

The curving drive was marked by ground-level marker lights and looked an ideal saunter in the darkness.  150 yards or so, it would lead to the single track public road, and 5 minutes each way along that would justify a dram in the bar before sharing a hot bath with Kathleen.  Yes, the bath is designed for two.  One of the gravest mistakes we made with our house was to omit that essential of the Hammam.

As the marker lights ended I could just make out in the reflected light the stone threshold pillars at the junction with the public road.  A mid-way course between them should be just about right.   But alarmingly and without warning my left foot dropped some 10 or 12 inches and my left shoe filled with cold water, sludge, leaves and a small collection of obscure invertebrates.  I had forgotten there was a cattle grid, and the round section rails were designed to shed footwear downwards.  Collie, having slipped through the paved pedestrian gate, turned and smiled.

A keek through the curtains as daylight dawned killed thoughts of a Munro day.  Cloud down to 300 metres and wind-driven rain thrown on to the window.  This continued through breakfast and gratifyingly took all the pressure off savouring smoked haddock and flavoursome poached eggs.  By 10:00 am. however the rain slowly ceased, the wind subsided, the cloud thinned, brightness grew and an irresistible urge to be outdoors developed.

The West Highlands after heavy rain are amazing.  Soft moist warm air, seemingly extra rich in oxygen and drawing out all the scents of the landscape.  Who could bear to be indoors?

Pushing uphill through wet thigh-high bracken, trousers were quickly soaked.  Soaked trousers led to soaked socks and soon each boot had a centimetre or so of fresh Highland water in it.  Those of you familiar with Scottish hill-walking will recognise this.  After reaching the top of the glen-side slope and scrambling up a craggy crest the glen floor disappeared from view and an, I suspect, seldom visited landscape hoved into view.  Undulating moor, peat hags, views to familiar recognisable and previously visited hills - Beinn Tulaichean, Stob Binnean, Beinn More, Beinn Lawers, Beinn Vorlich, Stuc a Chroin, Ben Ledi, Ben Lomond, and all the while brightening sky with patches of blue and shafts of sunlight bringing colour and texture to the hills.

The great thing about a wander through the quieter hill corners of Scotland is the sense of both solitude and place:  No waymarkers, no paths, no cairns, and yet there are local areas with a real sense of intimacy and 'presence'.  Hollows and bluffs which are home to hefted Blackfaces shy of human contact.

I was drawn by a craggy top named on the map Stob Caol at 734 metres, and spent a good 15 minutes or so there savouring the wilderness views.  What a super wee country we're privileged to live in.

A saunter downhill and then across a peat-hag ridden moor brought the glen into view again, and a steep descent to the public road.  Some descents seem alarming in their steepness but the sting can always be taken out by careful use of shelves and grassy rakes.

A shared dram in a shared bath, a log fire and a few slices of Inverlochlaraig venison made a perfect end to an idyllic day.