Why compensate companies for their “outrageous” activity?

Rachel Reeves: “outragious”

We understand that Keir Starmer is going to unveil a package of proposals in relation to the “cost of living crisis” on Monday. Their first proposal was unveiled yesterday by Jonathan Reynolds. Rightly they propose that the approximately 4 million people using prepayment meters should not have to pay more than other people. However, Reynolds told us that Labour was proposing to compensate the companies for the money they will lose by lowering the cost for prepayment meter users!

Apparently, this will cost £113 million. With 4 million people suffering under this system that would work out at a saving for the customers of £28.25 a year. To say this would make a marginal difference when people are facing a three or fourfold increase in the cost of their energy would be an understatement. That the Labour leadership could kick off their package with such a trifling idea, which includes compensating the companies is an indication of how far removed from reality they are. Why would you announce this separately from the “comprehensive” package?

Rachel Reeves says that it is “outrageous” that these people are forced to pay a higher price. Why, therefore, would you compensate them for doing something outrageous. Is it because they don’t want to appear to be anti-business?

Perhaps behind this crazy proposal to compensate the companies for profiteering at the expense of the poorest people, lies Keir Starmer’s approach to “business”. He has said that business “is a force for good” in society and that when businesses profit “we all benefit”. Clearly this is nonsense, at odds with the reality of millions of people’s lives. We have an economy in which exploitation is rampant. Why would non-union Amazon workers go on sit-down strikes at this time? Although it was an ‘illegal’ strike for a reasonable wage increase, in Swindon the workers complained of being treated like robots! Do you want a ‘partnership’ with this business Mr Starmer?

What does it mean that Labour is “pro-business”? The leadership appears not to differentiate between small businesses, big business and the private monopolies or near-monopolies. It has no anti-monopoly policy as far as I am aware.

Twelve-fold increase in price

One of the consequences of the energy price increases, if allowed to go ahead, is that many will be driven out of business. There is no energy cap for businesses. On the James O’Brien programmme on LBC, a caller who was a chip shop owner explained that his gas company was ending his contract which charged 3-4 pence per unit. They told him that the new contract would charge him 50p a unit; a twelve-fold increase!

Of 5.6 million businesses in the UK, in October 2021 99.2% of them were small businesses (less than 50 employees). Three quarters of them do not have any employees (other than the owner/s); 4.5 million people. 1.16 million companies have less than 10 employees.

If the Labour leadership had any intelligence it would be demanding that the government freeze energy prices so that domestic customers aren’t thrown over the financial edge and lots of small businesses, which dominate the economy, aren’t forced to close down because they cannot cope with huge increases in their costs.

In general the approach of the leadership is along the lines of telling people what Labour will do in government. What use is that in two years time? We need a mass movement to stop the impoverishment of great swathes of the population and an increase in unemployment. After all, the Bank of England has consciously decided to promote a recession by way of raising interest rates, in the full knowledge that it will double unemployment.

The fact that the campaign Enough is Enough, posed as building a mass movement to tackle the cost of living crisis, has already attracted the support of more than 250,000 in very short time is an indication of the fear of what is coming down the track and the motivation to do something about it.

Nothing less than demanding that the October prices increases are stopped, will do. Labour should be demanding that of the government and campaigning to build pressure on them.

Asked about nationalising the energy sector Reynolds said it’s too expensive. We need to get get money to the British people. Whilst a windfall tax on these companies is fair enough the fact is that the private market for energy needs to be ended and energy produced for social need rather than being subject to the price instability which is caused not just by episodic events like the war in Ukraine but by speculation in futures markets by people gambling to make money from price movements.

How you bring it to an end is a point of discussion, but recognition that it needs to be ended is the starting point. In fact, short of nationalisation there is nothing stopping the government introducing emergency legislation to take control of these companies, freezing prices and stopping them from handing out dividends. After all, this particular market mechanism is threatening to starve people and/or make them live in unheated housing even when it’s freezing outside.

Martin Wicks

August 13th 2022

Postscript. Talking of dividends, The Times is reporting that the private water companies have handed out more than £1 billion to shareholders over the past year, up 18% on the previous 12 months. Thames Water, alone, of these companies is losing 605 million litres of water a day. Even this hasn’t stopped directors being handed out bonuses.

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