Former energy minister Brian Wilson gives a typically blunt assessment of the Energy Commission’s report, in today’s Scotsman.
He says, “For the past half century, Scotland has been an exporter of electricity to the rest of the UK, due mainly to our nuclear stations. Last year, we exported more than a quarter of what was produced. The triumph of Nationalist policy will be to turn us into an importer. That matters less while we are part of the same state and market but would matter – and cost – a great deal if we were not.”
This point is also picked up in today’s Herald “it is not all one-way traffic along Britain’s interconnectors. Scotland has begun to import electricity from the rest of the UK. The amounts are not high. Over the past three years, some English-generated power has been required on 162 days. However, on 10 occasions, power was imported right through the day to meet Scotland’s needs and experts believe the situation will worsen as the country’s non-renewable power stations are due to close.”
As Magnus Gardham also reports, “In an article for the latest edition of the Royal Scottish Geographical Society’s magazine, The Geographer, Professor Paul Younger of Glasgow University argues that, with nuclear power stations Hunterston B and Torness due to close in 2023, and ageing, coal-fired Longannet not expected to last beyond 2025, there is barely enough time to build replacements that can provide the baseload, or constantly available, electricity essential when the wind fails to blow.”
While there is a perfectly respectable case for independence, these articles confirm that energy is one of the Scottish Government’s weakest points.
The Scottish Government’s Energy Commission has published its report on how the energy market and regulation could operate if Scotland votes for independence in September.
They confirm that a National Regulatory Authority will be required under EU law and the regulator’s duties should be clear and settled for a fixed period to give regulatory certainty.
The report argues that a Single UK Market can continue to work effectively and that there is overwhelming support for maintaining single markets in electricity and gas across GB because
this benefits consumers in both Scotland and the rest of GB and is consistent with the moves towards market integration across the EU. There would need to be robust arrangements governing any settlement with trade-offs that limit unilateral control affecting both partners. They point to working models in Ireland, Iberia and Scandinavia that show it can be done.
They also argue that there is a real opportunity to make a difference to fuel poverty through a fuel poverty agency tasked with targeting assistance, using smart meters and examining the role of the retail and distribution businesses.
This is without doubt a serious and detailed examination of the energy industry in Scotland and many of its conclusions will inform the debate, whatever the outcome of September’s referendum.
However, given the failures of the UK energy market as evidenced by the latest referral to the Competition Commission, it does have to be asked why an independent Scotland would want to join such a system? After all, Scottish Government ministers have been some of its fiercest critics. Joining a single market severely constrains an independent Scotland’s ability to correct the market failures that are all too apparent. The Irish model actually showed that it only works when both parties are pursuing similar policies.
Even if we did seek to join, there is no guarantee that rUK would agree. If they did, it is likely to be on their terms as a major partner. Subsidising Scottish renewables is not likely to be high on their list of priorities. Expecting the EU to come to the rescue on a level playing field, is naive in the extreme.
So, while this is a useful report it leaves open a number of key concerns. Scottish consumers and the industry need radical reform, including greater diversification of ownership. Making those changes will be all the more difficult stuck in the UK system.
With yet another investigation into the failed energy market, it’s hard to see why consumers should have any more confidence in this latest initiative.
Ofgem is referring the energy market to the Competition and Markets Authority (CMA) for a full investigation. They claim this should ensure, once and for all, that competition works effectively for consumers, by bearing down on prices while driving improvements in customer service and innovation.
Tom Greatrex, Labour’s shadow energy minister, said: “The prospect of a full blown market inquiry is confirmation that there are structural issues to address, despite the government’s lack of interest in real reform. Labour has the policies to reform, refocus and re-set this market, and we hope an investigation by the CMA will provide the impetus and expertise for such action.”
TUC General Secretary Frances O’Grady, put it more bluntly. She said: “Energy companies have been ripping off customers for years and today’s decision to refer them to the Competition and Markets Authority is long overdue. It’s about time the government stood up for consumers who are sick of seeing their rising bills being used to prop up bloated profits.”
Citizens Advice added that the investigation also needed to consider whether competition was working for people on low incomes, not just active consumers. Gillian Guy, chief executive of Citizens Advice, said: “Citizens Advice sees people on lower incomes who are struggling to meet extortionately high energy costs, brought about in part by energy firms’ failure to provide real choice for people with less money to spend.”
In a separate initiative, Ofgem has called on the Big Six energy suppliers to explain to their customers what impact falling wholesale costs will have on their energy prices. Both wholesale gas and electricity prices have been falling significantly. In early June 2014, gas prices for next day delivery reached their lowest level since September 2010 and are now around 38% below this time last year. The trend has been similar in electricity, with prices reaching their lowest level since April 2010 at the beginning of June. They are currently around 23% lower than this time last year. Forward prices for gas and electricity have also fallen. Compared with last winter, gas and electricity prices for the coming winter are around 16% and 9% lower respectively than last year.
Even energy minister, Ed Davey, has admitted there was a “lag” in falls in wholesale electricity and gas prices being passed onto energy customers.
In this context, it is hardly surprising that customer complaints to the Big Six energy companies have reached their highest-ever levels. The Big Six suppliers received a total of 1.7m complaints in the first quarter of 2014, up from just under 1.5m in the same period last year. The quarterly performance is the worst for the sector since its biggest players started compiling records in 2012.
A survey by SMCDB found that more than half of UK consumers don’t trust energy suppliers amid widespread confusion and anxiety about bills. Some 51% said they did not trust any energy supplier, with this rising to 57% of those living in fuel poverty or with a disability. More than a third were concerned that their energy bills are not accurate, and 41% worried that they pay for more energy than they consume.
As usual, Ofgem’s solution is that more customers should switch supplier. Under their new plan consumers will be able to switch electricity and gas supplier within two-and-a-half weeks, including the two-week cooling off period. They have also published additional plans to introduce next-day switching by 2018 at the latest. Around 62% of people have never switched energy supplier, and these people are often on old, uncompetitive deals and consumers could save up to £200 a year if they switched.
However, the SMCDB survey revealed that more than two-fifths of consumers did not believe they have the information they need to choose the right energy tariff, while almost as many were not confident they had enough information to select the right supplier.
Energy companies are now making a record £96 per household, with profits doubling in the past year despite a drop in the price of wholesale gas. The profit on selling gas has now reached 10 per cent – double the 5 per cent profit margin companies were making this time last year.
On this evidence, yet another review of our failed energy market looks less than convincing to consumers. That’s why there is growing support for more radical solutions, including public ownership.
New renewable generation in Scotland is almost entirely dominated by onshore wind. That’s not only controversial, but also intermittent. Are there other technologies that might deliver viable generation to the grid.
One established technology is solar panels. Angus might not immediately strike you as sun kissed, but there are proposals, for former crop fields within New Mains of Guynd Farm in Angus to be transformed into a park for solar energy production for 25 years. The system will have a capacity of 9.5 megawatts, which could provide power to 2500 homes.
Ron Shanks, managing partner of the developers BWE Partnership indicated that this is not the limit of their ambitions, he said, “We continue to be on the look-out for further solar park opportunities, especially in Angus and Fife, as we believe there is a real opportunity for Scotland to harvest energy from the daylight.”
Cost has always been a barrier to the use of solar panels. However, a breakthrough in the production of solar cells could make the next generation of solar panels cheaper and safer, and promises to accelerate the development of solar energy over the next decade. A technical advance based on an edible salt used in the manufacture of tofu could revolutionise the production of future solar panels to make them less expensive, more flexible and easier to use than the current models.
Jon Major of the University of Liverpool, who led the research said, “We certainly believe it’s going to make a big change to the costs of these devices. The cost of solar is going to match fossil fuels eventually but this is going to get us there quicker.”
Technologies like this also holds out the prospect of greater diversification in the ownership of generation. SmartestEnergy’s Energy Entrepreneurs Report 2014, shows that 169 new independent renewable projects of 50kW or more started in Scotland in 2013, up 50 per cent on the number in 2012. Scottish Renewables said the rise showed that independent electricity generators, including communities, businesses, farmers and public bodies, were increasingly taking their energy future into their own hands. Given the modest scale of total generating capacity this is somewhat over spinning the case, but none the less it is progress.
Diversification or value for money doesn’t appear high on the UK government’s agenda. The National Audit Office has warned that the government may have handed benefits to corporate power providers at the expense of consumers by awarding £16.6bn of renewable energy contracts without putting them out to competitive tender.
A spokesperson said, “As the contracts-for-difference regime has the potential to secure better value for consumers through price competition, committing so much of the available funding through early contracts, without competition, has limited the department’s opportunity to secure better value for money.”
Finance for new projects could come from the Edinburgh based Green Investment Bank. It unveiled a new fund that could give it access to as much as £500 million to help kickstart more renewables projects.
As Scotland doesn’t have a constant stream of sun or wind, a means of storing energy is a vital part of any future energy system that includes a substantial amount of variable and uncontrollable renewable energy. Energy storage provides flexibility and reduces the need to rely on fossil fuel back-up power. While there isn’t one storage technology, if we are to hang our low-carbon future on renewables like wind and solar, then governments need to focus on supporting industry to develop energy storage technology.
So, there are alternatives to onshore wind, but it will require government support to turn them into reality.
The new Scottish National Planning Framework includes a range of major energy projects and some restrictions on wind farms. However, anti-fracking groups are disappointed that there will be no national requirement for buffer zones around unconventional gas sites.
While the plan confirms the Scottish Government’s ambitious renewable targets it recognises the need for a minimum of 2.5 GW of thermal generation with CCS to meet our requirements and support diversification of supplies. There will be no nuclear new build in Scotland, although they don’t rule out extending the operating life of Scotland’s existing nuclear power stations at Hunterston B and Torness. Subject to strict safety considerations.
There will be opportunities for communities to develop energy generation, although the ambition remains at a small scale. The plans aim to achieve at least 500 MW of renewable energy in community and local ownership by 2020. CCS, pumped storage and hydroelectric power also feature in the plan.
Electricity grid enhancements will facilitate increased renewable electricity generation across Scotland. An updated national development focusing on enhancing the high voltage transmission network supports this, and will help to facilitate offshore renewable energy developments. Distribution Network Operators (DNOs) also have plans to make essential upgrades to the distribution networks.
The absence of buffer zones around fracking sites in the plan came under most criticism. Green MSP Alison Johnstone said: “They may not be as gung-ho as Westminster but the Scottish government has failed to come down on the side of communities worried about the impacts of fracking. Greens proposed a 2km buffer zone but this has been rejected and now it will be up to developers to put forward a plan for approval. We already have standard buffer zones for wind farms and coal mines, so why not gas extraction?”
The Falkirk campaign group feel badly let down after assurances they thought they were given at the SNP conference. They said:
“It is with utter consternation that we now discover that our Scottish Government is intending to allow the industry to set their own buffer zones i.e. to self-regulate. Given recent experience in the Banking, Press and Food Industries self-regulation does not work. The Scottish Government’s claim to be listening to communities or wishing to protect them is seriously in doubt if this policy is permitted. The self interest of corporate business and their legitimate goal of profit maximisation prohibits them from seeking the best interests of communities and the environment.”
UK ministers claims that there are no US studies on water contamination linked to fracking. However, the TUC has highlighted several published academic studies. One shows concentrations of methane, propane and ethane in drinking water wells across Pennsylvania, where extensive shale gas fracking is taking place. The reason is leaking or fractured drills that pass through the water table into the shale gas rocks below.
The TUC also argues that the UK government’s infrastructure bill should fast track investment in carbon capture and storage technology, rather than accelerating a dash for onshore gas through fracking. Their study shows that job for job, the case for CCS seems to be far more compelling, as CCS lowers carbon emissions. Shale gas could boost greenhouse gas emissions through methane release, a far more potent greenhouse gas than carbon dioxide.
Of course planning policies only enable developments. Delivering on the Scottish Government’s energy plans will be much more challenging. They can also be sure that the anti-fracking lobby will be watching them all the way.
In our look at the Scottish Water capital programme we noticed that the White Paper ‘Scotland’s Future’ was silent on the future of Scottish Water.
Our request for clarification resulted in this helpful response from the Scottish Government.
“The Water Industry in Scotland is already a devolved issue. Scottish Ministers have full policy responsibility for the Water Industry including the ownership of Scottish Water. This includes the principles that must underpin the setting of charges for customers and the improvements to services that Scottish Water must deliver. The Water Industry Commission for Scotland (WICS), Scottish Water’s economic regulator, determines the customer charges, consistent with the principles set by Ministers, necessary to fund the delivery of services to customers and the required improvements.
Scottish Water is performing well as a publicly owned corporation; evidence of its performance is clearly demonstrated by the fact that Scottish Water is matching the levels of service provided by the companies in England and Wales whilst ensuring that the average household charge, at £339, is around £50 lower.
Scottish Water will remain in the public sector and continue to operate in the interests of its customers, the people of Scotland.”
In view of the controversy over the BBC and other public bodies membership of the CBI, we asked Scottish Water for their affiliations.
Both Scottish Water and Business Steam confirmed that they are not members of CBI/CBI Scotland.
Both organisations belong to trade bodies, SCDI and various Chambers of Commerce. Perhaps the only surprise is that Business Stream is a member of the Institute of Directors. It is hard to see why a public organisation would belong to a right wing, free market group. Unless they are doing missionary work!
Scottish Water has delivered a massive capital programme to update our aging infrastructure. It spends just under £500m a year on infrastructure including pipes and treatment works, funded largely by the water charge payer with borrowing support from the Scottish Government.
While Scottish Water is a public service there has been an incremental drift towards privatisation. Firstly, through hugely expensive PFI schemes that even the pro-privatisation Water Industry Commission (WIC) has criticised as being poor value for money. This has been followed by a broader PPP scheme, Scottish Water Solutions and the extensive contractorisation of Scottish Water.
Utilities Scotland submitted FoI requests to ascertain the extent of privatisation in the delivery of the capital programme. The table below sets out the capital programme for each of the last five years and the proportion by value that is delivered by Scottish Water and external contractors.
This table shows that in the last four years for which figures are available, 92.5% of Scottish Water’s capital programme has been delivered by private contractors, 7.5% by Scottish Water staff. By any standard that is substantial privatisation.
Scottish Water likes to claim that over 85% of Scottish Water’s supplier spend is with organisations who have locations in Scotland. They also say that the delivery of the capital expenditure has involved a total of 135 framework contractors – 106 being Scottish based and 29 being UK based, “helping to support jobs in the Scottish economy”.
Utilities Scotland sought to test this claim by asking Scottish Water to break down the amounts spent into companies headquartered in Scotland, rest of the UK or outwith the UK. This is important because ‘locations’ doesn’t necessarily mean Scottish companies or even Scottish jobs. It could simply mean a depot for a particular project. The number of ‘framework contractors’ is also fairly meaningless without knowing the value of the contracts. Lots of small value local contracts, or extensive sub-contracting could skew the significance of this statistic.
It hasn’t been possible to test these claims of Scottish jobs because Scottish Water says they do not hold the information on headquarters, they only record whether contractors have a Scottish or UK base.
Scottish Water has benefitted from a fairly stable political environment for a number of years. The SNP, Scottish Labour and the Greens have supported public ownership with only the Conservatives and Liberal Democrats making the case for privatisation. However, it is perhaps surprising that the White Paper ‘Scotland’s Future’, has no mention of a commitment to a public water service should Scotland vote for independence in September. Given current SNP policy, it would be helpful if the Scottish Government gave some reassurance that this is simply an omission.
The reaction of the European Commission to the citizen’s initiative, ‘Right to Water’, falls short of what 1.9 million people across Europe asked for. In particular, there is no proposal for legislation recognising the human right to water. The Commission has also not committed to explicitly exclude these services from the trade negotiations such as the Transatlantic Trade and Investment Partnership (TTIP) in their Communication. This could also have implications for Scotland’s public service model.
Scottish Water is a public sector success story, but we are only too aware that there is a powerful lobby for privatisation.
The gradual drip of privatisation has reached epic proportions in these disclosures about the capital programme. The privatisation sharks are still circling Scottish Water and Scotland needs to remain vigilant.
UK government ministers through DECC are consulting about overhauling trespass laws to make it easier for energy companies to explore for shale gas, amid concern that efforts could otherwise be stymied by lengthy and costly court proceedings.
DECC says that the proposals outlined in the consultation will apply to England, Wales and Scotland in respect of petroleum (i.e. gas and oil). In respect of deep geothermal energy, the consultation also covers England, Wales and Scotland. However, the application of proposals on deep geothermal energy in Scotland and Wales will be the subject of consultation with the respective administrations. This is a complex area of jurisdiction under the Scotland Act with potential conflicts between the reserved powers over gas and oil as against planning and trespass laws that are devolved.
Currently, operators must negotiate these rights of access with every landowner living above underground drilling, even though those works occur far beneath the surface level – typically more than a mile down in the case of shale gas and oil or geothermal energy. They argue that the landowner is very unlikely to make use of the land at that depth, and the drilling activity itself is so far down that it will have no negative effect at the surface. Given that a large area of underground land may be accessed in shale or geothermal operations, companies may need to negotiate access rights with hundreds or possibly even thousands of land owners whose land is above that area.
Greenpeace UK director John Sauven said: “Having failed to reassure the country that fracking is safe, ministers now want to render people powerless to oppose it. There’s nothing fair or just about this underhand ploy to strip people of their legal right to say no to fracking under their homes.”
Ministers are also planning to increase additional payments in England to an average of £800,000 for communities affected by fracking. The announcement shows that the government accepts it must reach out to communities angered by its plan to deny homeowners the right to use trespass laws to contest fracking developments. The Scottish Government has indicated that it has no equivalent plans.
Despite the high profile campaigns against fracking, public opinion is not yet opposed in principle. Dr Rusi Jaspal from de Montfort University argues that the promise of cheap energy may outweigh the perceived risks. It is the case that support has declined since the siege of Balcombe and other high profile campaigns could have a further impact on public opinion. It would also be interesting to see if this support in general, translates into support for fracking in respondents own backyard! A good indication of the likely answer to this comes in a YouGov poll, which indicated that 74% were opposed to the government’s plans on trespass.
Of course, all of this depends on viable amounts of gas being available. The British Geological Survey has landed a big blow to ministers with their conclusion that “there is unlikely to be any shale-gas potential” in the Weald area of England. But that still leaves the ‘desolate’ north!
The firm Pilot Offshore Renewables plans to moor eight floating wind turbines ten miles off the Kincardineshire coast, south of Aberdeen. It could be the world’s first floating wind farm.
The company wants to start construction in the second quarter of 2016 and operating by the end of 2017. Floating wind farms have the advantage of being able to operate in deeper water where they are less likely to generate complaints about their visual impact. Not just Donald Trump!
The UK government has also approved eight projects, from 57 applications, to receive Contracts for Difference (CfDs), which guarantee prices for renewable energy suppliers. These could cost up to £1bn each year in subsidies, but the government says they would encourage firms to invest much more than that in low-carbon electricity generation. The Beatrice offshore wind in the Outer Moray Firth is the only Scottish project.
Friends of the Earth said the projects would attract billions of pounds of investment and provide thousands of new jobs. A spokesperson said, “It’s good that the government recognises renewable energy to be our best, and most available, solution.”
A report from the University of East Anglia (UEA) and University of Sussex says that initiatives such as community renewables could make a big difference to climate change and energy security. But government needs to do more to support them. It found that, “While community energy has successfully grown up in between the cracks of the mainstream energy system, it needs to be nurtured and supported … if it is to continue to grow and develop.”
Alasdair Cameron, at Friends of the Earth, said: “Instead of undermining investment in solar and wind, ministers must do much more to help communities reap the benefits of clean power. A good place to start would be to enable schools to borrow money to afford the up-front cost of solar panels.”
However, solar panels have been criticised as a subsidy for the rich homeowner at the expense of the poor. But Christopher Emmott at Imperial College argues that it doesn’t have to be that given the range of ways they can be introduced, he concludes:
“So a subsidy for solar power doesn’t have to be a subsidy for the rich. Rooftop solar can help grow local economies, provide local jobs and increase local spending. At the same time it can provide a bulwark against energy poverty through the work of community energy co-operatives and installations that provide power to social housing. Photovoltaics are nothing less than a democratising force on the energy supply system – but this requires people, communities and companies to act together to make the most of it.”
Another renewable solution could be heat pumps. A heat pump collects warmth from cool water in rivers and lochs and delivers it at a higher temperature through compression. The process requires some imported energy, usually electricity, but returns the equivalent of three units of heat energy for each unit of electricity used.
This technology devised by physicist Lord Kelvin 150 years ago could save Scottish businesses £250 million annually. A new report, commissioned by Glasgow University and due out in June, estimates that heat pumps could shrink the nation’s carbon footprint by the equivalent of 260,000 around-the-world car journeys every year.
Finally, Energy Minister Fergus Ewing has announced the adoption of a set of principles designed to maximise community benefit from onshore renewable energy developments. These are aimed at delivering the 500 megawatts of community and locally owned renewables target by 2020.
The key principle is the promotion of a national community benefits package rate equivalent to at least £5,000 per Megawatt per year, index linked to inflation for the operational lifetime of the development. So for example, a 20 Megawatt windfarm of eight turbines will generate at least £100,000 a year for the local community.
A different, sustainable economy is possible, for Scotland and globally, if we break away from the neo-liberal race to the bottom.
Today, I was speaking at the Friends of the Earth Scotland’s conference, ‘Transforming Scotland ‘s Economy’. My contribution was on the impact of privatisation with a focus on the energy industry and local government.
Instead of lots of numbers and charts that I am inordinately fond of, I started with a topical story that for me illustrates all that is wrong with our economic system.
Soma, is a small mining town in western Turkey, host to one of the greatest industrial crimes in mining history when an explosion trapped 800 miners. The death toll has already claimed 280 lives and may yet exceed 300. I use the word crime deliberately, this was no ordinary accident.
Turkey and people across the world mourn the lost lives, but we should also feel anger towards a system that squeezes out profits at the expense of workers’ safety.
The Soma mine was privatised in 2005. There are 4.5 worker deaths per million tons mined in Turkey’s publicly-owned plants, compared to the private sector average of 11.5 deaths. Workers in a privately owned mine in Turkey are ten times more likely to die on the job than their Chinese counterparts. We should also remember 1000 Chinese miners die each year, albeit down from 6000.
This is not simply misfortune. Unregulated, hasty privatisations have forced people into more informal work coupled with the use of sub-contracting. The new owners proudly declared that production costs had declined from around $120 per ton under public ownership to just under $24 per ton. This “miraculous market success” was the determined evasion of the security measures and safety standards. Production tunnels were extended from 350 meters to more than 2.5 kilometres. The government cut most formal safety inspections.
This story is replicated across the world. 1200 mostly Indian and Nepalese building workers have died building World Cup stadiums in Qatar. A death toll that is likely to grow to 4,000 before a ball is kicked. Forced to work in conditions that are little more than slavery.
If all this sounds like a story of medieval practice in a countries far away, it isn’t. In the UK, the HSE is being slashed, inspections cut and safety regulations are described as Red Tape. In Scotland we had the Stockline explosion in Glasgow where the lessons have still not been learnt. Environmental health officers rarely do safety inspections in Scotland any more after their numbers have been cut. Food safety is being deregulated with proper meat inspection of some animals abandoned at the behest of meat producers focused on profits.
All of this is so the richest in society can get even richer.
The richest 1% of the population are becoming increasingly removed from everybody else. Share of post-tax income captured by the richest 1% leapt from 8.2% to 9.8% in 2013/14. Total post-tax income increased by about £37bn last year. Of this, £16bn went to the richest 1%, with just £11 billion shared across the poorest 50%. They also dodge taxes with £120bn lost to the exchequer. Just think what those resources could do for our battered public services.
The share of wages as a percentage of national income has progressively fallen from around 58% in the early 1980’s to 54% in 2011,while profit’s share has increased from 24% to 28% over the same period.
This is not just about cash. As this week’s new IPPR report ‘Fair Shares’ highlights, workers experience of work is disempowering, lacking dignity and autonomy. One-third of all employees are fearful at work in some way, most feel that they lack a say over decisions and a majority feel disengaged at work. Growing insecurity at work, the rise of zero-hours contracts and the growth in jobs paid less than the Living Wage. 1 in 5 Scots are paid below the Scottish living wage.
These statistics reflect the prevailing interests in our economy. The primacy of shareholder interest and the spread of financialisation have structurally unbalanced returns towards a narrow elite. The capture of returns has become detached from the creation of value. Just one of the points brilliantly set out in Thomas Piketty’s ground breaking work, ‘Capital in the Twenty First Century’.
This is a form of capitalism in Scotland and the rest of the UK that values short termism over long term investment. Illustrated by huge drop in R&D spending in the UK that mirrors the fall in GDP. While successful economies are growing their R&D spend.
The ConDems are proposing a future of government cuts without end, of growing inequality, and of a Britain with only 10% of our output in manufacturing, finding it increasingly difficult to pay our way in the world.
All the evidence shows that countries with lower levels of inequality, such as the Scandinavian countries and Germany, have performed better than those countries, such as the UK and the US, where high and widening levels of inequality have accompanied relatively poor economic performance over recent decades.
So what about some solutions? I illustrated some of these by looking at the energy sector.
The UK had a public service energy industry, privatised in the Thatcher era. We now have a so-called energy market, with huge challenges including cost increases for consumers, financing infrastructure investment and a shortage of workforce skills. The lights in our homes are largely powered by generating capacity that was built when energy was a nationalised industry – when we planned our energy not left it largely to the vagaries of the market. Most of Scotland’s existing energy capacity will close within 15 years and the UK needs something like £120bn of new investment.
In the ‘Red Book on Scotland 2014′ I argue for a planned, balanced energy policy. A key element of that is not Morrisonian nationalisation, but rather a more diverse generation ownership model. In Scotland, renewables are dominated by big business, whereas in Denmark small scale operators play a much bigger role. Some key features we might adopt include:
A strong political vision over the long term, with commensurate policy and planning provisions.
Favourable feed-in tariffs to create the incentive for new generation using different business models.
A state owned grid that will usually connect up communities. The cost is repaid through a public service obligation payment in energy bills.
A clear focus on energy efficiency with measures to tackle hard-to-heat homes.
Strengthening the ability and willingness of local government to get involved – a utilities culture largely lost in the UK.
I completed my story with the last of these – local government.
Public services as we know them evolved due to the failure of the voluntary and private sectors to meet the needs of the people. While the well off could buy many things for themselves, infrastructure like roads, water supply and sewerage needed coordinated action and investment. Even the wealthy recognised that it was in their own self-interest to ensure that everyone had clean water to drink and wash in and that waste was dealt with, because everyone suffers when others aren’t covered. The vermin attracted to a street where only half the bins are emptied would be a problem for everyone.
Public sector growth in the 20th century was about providing fair and equal access to services. This also highlights that the defining difference between public and private provision of services is democracy. Not just voting, but deliberative involvement including not just communities of place but also communities of interest.
Scotland has local government but not many genuinely local councils. We have fewer councils and councillors than any other in Europe – an average of 1 councillor per 4270 people while France has 1 per 125. Stronger local government needs a wider range of people as councillors, power over finances and integration with other services that are being increasingly centralised.
Greater public ownership has widespread public support. Polls show that two thirds believe public services should be provided in-house, not run like a business and with stronger user voice. We should also remember that inequality impacts on people’s inability to influence the direction of the public sector, so any attempts to support local democracy will have to ensure that all voices, not just the already advantaged, are able to influence decision making.
How might we finance local energy generation? One approach is to use some of the £24bn in Scottish local authority pensions funds, provided by workers and the taxpayer. Half that money is currently invested abroad. However, governance is weak with decisions driven by advice from the very same fund managers who got us into the current financial crisis. They also cream off profits for themselves in transaction charges. I have written a paper that shows how this could be done for housing and I believe that approach could also work for energy generation and efficiency.
Our economic system is wrong in so many ways. Not just here in Scotland, but globally. The solutions are complex, but we shouldn’t be overwhelmed by the scale of the problem or the solutions. We can take action as individuals and more importantly collectively. From disinvestment campaigns to public service reform – there is a better way. One than prioritises jobs, wages, public services, fair taxes in an environmentally sustainable way.