Why Margaret Thatcher caused the energy crisis

 Like many businesses, we are faced with the effects of energy costs going through the roof. This also affects our household bills, as we have gas central heating. Electricity prices have also risen. The news is full of stories of key UK industries facing bankruptcy caused by the huge increase in gas prices. These are up by 600% from last year.

You may ask why we are facing these huge increases? It may sound a strange thing to say, but all of this was foretold about 35 years ago by none other than Tony Benn. I have never been a Bennite, but anyone who ever saw Tony Benn speak would confirm that he was one of the best politicians to watch speak, regardless of what you thought of his views. Benn was a highly intelligent man and  agreat speaker. At the time, I went to a talk he was given (possibly to promote a book, I can't remember). The hot topic of the day was the privatisation of the Gas Industry. The Thatcher government was running a big campaign to promote this, under the auspices of the 'Tell Sid' Campaign.

As anyone who recalls Tony Benn, the darling of the left, will know, Benn was not a fan of Thatcherism or privatisation. Benn had been the energy minister who championed the UK's use of nuclear energy (although he later changed his position). It was a subject he knew about. He took a question on the subject and then gave a detailed and sobering explanation of why privatisation of the energy sector was a very bad idea for Great Britain.

Benn explained that energy production and security of supplies was vital to Great Britain. Without it the country would simply not be able to function. He said that the question was not whether energy was cheaper, but whether it would be secure if the industry was privatised. He then set out his reasons why it wouldn't be under private and potentially foreign ownership   (as I recall, many Tories at the time stated that it was scaremongering to say it would end up in foreign hands, which is of course, exactly what has happened). 

Benn explained that managing energy was a very long term business, that required proper planning. New power stations take a very long time to build, power networks also cannot be put into place overnight. The UK had developed an excellent national grid under a nationalised system and power supplies were robust. As for gas, storage facilities needed long term planning and the UK needed a large reserve, as we never know if a winter will be harsh or mild. Most years, the UK had far too much gas, but if we got a long, cold winter like 1962/3 then we could find ourselves in trouble.

Benn then explained what efficiency meant in the gas industries. It meant less investment, less maintenance and less long term planning. He said that in the short term, we may see smaller bills, as a leaner, meaner organisation was built. But what this would mean was less people on the books in the long term. If a network is well maintained, it works well. For a year or two, you can cut back, but over thr course of time, equipment starts to degrade. Storage capacity is a big expense, that isn't really a cost effective use of resources for a private company, although it is vital to keep us warm. Benn stated that we'd see a gradual winding back of storage capacity and reductions in the ability of the network to cope with long, cold spells. He said that he could see a time where the UK would need to be reliant on imported gas, and this would make storage capacity even more important. He doubted that a privatised network would ever put this in place. In 2017, the UK closed its main gas storage facility at Rough. We now are ridiculously exposed to shortages, as detailed in a recent New Statesman article. Most European nations have a storage capacity of 25% of their national capacity. We have a mere 2%, transalating to less than eight days supply. 

Benn also spoke about privatisation in the electricity industry, he said that all of the talk about cheaper electricty and being able to shop around worried him. He stated that the most fundamental thing when looking at electricity provision was security of supplies. This has to be planned nationally and in the long term. There will never be a situation where more than one wire comes into your house.  Pressure to drive costs down are not compatible with good long term planning. He stated that any system where suppliers bought energy and then sold it on, to take advantage of short term drops in energy prices, would ultimately expose customers to more risk, if supplies were interrupted. There is only one national grid. Cheaper suppliers would always be taking a punt on the market. They could also distort costs, which may have severe implications for large scale users, who have to plan long term. Ultimately this means that big users have to figure out a way to ensure a stable long term price, which may work out as more expensive. Ultimately this could mean UK manufacturers were at a disadvantage.

None of this was listened to. Just like the banks before the credit crunch in 2008, the system of regulation around enegery has been gradually liberalised since the 'Tell Sid' campaign, to the point where the whole system is not fit for purpose. We have sacrificed our energy security for the sake of the dogma of the free market Thatcherites. As always happens, when times get bad in key industries, the state has to step in. The right wing zealots who claim that the market is always right have been proven wrong time and time again as banks, rail companies and now the power industry are pulled out of the fire by taxpayers money. 

As a business owner, I don't believe that the state should run everything, but things like utilities, rail and health are areas that I believe the state should ensure that we have running properly. No one who has seen the way rail privatisation evolved, has watched the energy crisis unfold or seen the nonsense of the Tory Crony PPE contracts could possibly say this is what is happening in the UK. We are in danger of becoming a basket case economy and we need some sanity in how we manage our key industries. I also believe that when the taxpayer bails a private enterprise out, the taxpeayer should be the primary beneficiary when things are back on track. The one exception I'd make is where they are the victim of government mismanagement of the economy. Thatcherism worked on the principle that 'Lame Duck Industries' should go bust. That is why we lost most of our manufacturing capacity in the 1980's. Sadly many were only 'Lame diucks' because her government forced us into recession. We allowed the destruction of the UK motor industry and then paid foreign companies to do exactly the same thing. It is crazy. 

Thr root cause of the energy crisis we see today was the Thatcherite obsession with privatisation. It hasn't worked. It is tme that the government stepped in and put it back on track. This means long term planning and expense. To me that is a price worth paying to ensure the UK is not at the mercy of foreign powers. Boris Johnson and his merry band took us out of the EU to 'take back control'. That phrase is meaningless if Mr Macron or Mr Putin can turn off the lights, which they can at any time they want.