Obscene profits – a social worker’s view on why utilities should return to public ownership
Published by Professional Social Work magazine, 17 October, 2022
The utilities were in the public sector, until the 1980s when they were privatised by the Conservatives under Margaret Thatcher.
And what a success privatisation has been. It has created dozens of millionaires paid for by the general public through higher gas, electricity and water bills!
The half-yearly profits of the utilities and their chief executive’s pay are obscene:
COMPANY HALF YEAR PROFITS 2022 CHIEF EXECUTIVE’S PAY
EON £3.4bn £1m
National Grid £3.4bn £6.5m
RWE £2.2bn £3.6m
Orsted £1.5bn £1.7m
Centrica £1.3bn £4.5m
SSE £1.2bn £4.5m
Uniper £1bn £1.6m
Scottish Power £925m £1.15m
Drax £225m £2.7m
EDF £225m loss £1m
Rather than a windfall tax to help people with their bills, as advocated by opposition parties, if the gas and electricity companies were taken back into in public ownership their profits and excessive salaries could be used to reduce bills for everyone.
Instead of chief executives and senior managers earning between £1 million and £6.5 million per year there would be just two chief executives: one for gas and one for electricity, paid on public sector rather than private sector pay scales earning around £200,000 each (Birmingham City Council's chief executive gets £186,000 for, arguably, greater and certainly wider responsibility).
To quote organisational behaviour expert Charles Handy from The Age of Unreason: “The leader must remember that it is the work of others. The vision remains a dream without the work of others.”
What must it do to the morale and motivation of a low paid worker at the National Grid to know his or her chief executive is paid £6.5 million? Such high salaries may prove counter-productive in making the job that much harder and the service less, rather than more, productive.
So just how bad is the situation?
According to recent analysis by the University of York, undertaken before the government's most recent intevention, two-thirds of UK households would have been trapped in fuel poverty by January meaning their fuel costs would have been ten per cent or more of their income. Some 18 million families, or approximately 45 million people, would have been struggling to make ends meet. Nearly nine out of ten of retired people (86.4 per cent) and single parent families (90.4 per cent) with two or more children would have fallen into fuel poverty.
The government’s response, unlike that in the European Union which has imposed a windfall tax, has been to leave the energy companies’ profits largely untouched, while borrowing money to reduce bills. This will ultimately have to be repaid through income tax by working people.
The government is also planning to remove the cap on bankers’ bonuses which was introduced after the 2008 banking crisis when 50 per cent of taxpayers’ money used to bail out the Royal Bank of Scotland went straight out in bonuses to the very people who had failed to prevent the collapse. Banker’s renumeration is already in excess of that to the energy companies above.
All this comes at the end of a decade during which the rich have got richer whilst the majority, subject to austerity, have got poorer. According to a report by the Paris-based World Inequality Lab, 2020 saw the steepest increase in billionaires’ wealth on record. In contrast, 100 million additional people worldwide sank into extreme poverty.
A consequence of this widening inequality is that, even prior to the recent cost of living crisis, there were 3.9 million children living in poverty in the UK. The government had focused on making work pay, but two in three children who were in poverty had a parent who was in work. These parents were no more able to do anything to help their children than are older people who have no earning capacity or borrowing power, many of whom prior to the abolition of the ‘default retirement age’ had been forced into retirement and condemned to spending the rest of their lives in poverty.
Children brought up in poverty are less likely to do well at school, more likely to have health problems, and have a shorter life expectancy.
Also prior to the current cost of living crisis, there were two million older people living in poverty in Britain. With the known correlation between income and demand upon the NHS it is not surprising, that four-fifths of the expenditure of the NHS went on older people. Britain has one of the lowest state pensions in the western world and yet during the current year the government reneged on the “triple lock” and discontinued free television licences, effectively reducing pensions still further.
According to Philip Alston, special rapporteur on extreme poverty to the UN, who visited the UK the year before the pandemic, government ministers were in a "state of denial" about poverty. He said that despite being in one of the world's richest countries he had encountered "misery". He said: “During my visit I have spoken with people who depend on food banks and charities for their next meal, who are sleeping on friends’ couches because they are homeless and don’t have a safe place for their children to sleep, who have sold sex for money or shelter, children who are growing up in poverty unsure of their future.
“I’ve also met young people who feel gangs are the only way out of destitution, and people with disabilities who are being told they need to go back to work or lose benefits, against their doctor’s orders.”
Quoting figures from the Joseph Rowntree Foundation, he flagged up the fact that more than 1.5 million people were destitute at some point in 2017, meaning they lived on less than £70 a week or went without essentials such as housing, food, clothing or heating. A fifth of the population, amounting to 14 million people, were living in poverty, Prof Alston said. And the situation is now far worse.
How has this come about?
No matter what excuses are given, or whoever one tries is to blame, the current crisis is due to the unacceptable face of capitalism, greed and profiteering as the rich exploit the poor to line their own pockets.
Take petrol, as an example: consumption has not dropped despite the increased price which would suggest there is no shortage and it is not a matter of rationing, or supply and demand, but sheer profiteering. Shell doubled its profits in one year to £9.4 billion. And BP announced profits of £6.95 billion between April and June.
Since the privatisation of water in the 1980s, bills have gone up by 40 per cent, and according to the Angling Trust, £72 billion has been paid out to shareholders and the bosses have received £58 million in the last five years alone. This has not led to improved efficiency either, with three billion litres of water lost through leaks every single day; not to mention the illegal discharge of affluent into our rivers, lakes and sea.
What would be the payback from public ownership?
There are 27.8 million households in Great Britain whose average fuel bill in the first half of 2022 was £1,971 per year – projected to rise to £4,266 per year by January before the introduction of the £2,500 cap for the next two years. Domestic consumption accounts for 29 per cent of gas and electricity use with the majority in the commercial sector. If the £30 billion profits were shared pro rata between the sectors, £10 billion would represent £359 off the average household bill. And there would be other savings to be made on the number of chief executives and their salaries, reducing bills further.
Instead of stigmatising 'handouts' to the least well off, why not charge a reduced tariff for the first 12,000 kWh of gas, the first 1,900 kWh of electricity and first 127 litres of water or even make them free, with the cost shared between increased charges for consumption above this level and taxation in that income tax is the most equitable way of paying for public services. This would benefit everyone but more particularly the less well off and small businesses.
It would also save millions on debt collection and court costs and improve mental health and the physical consequences of living in a cold home, reducing demand upon the NHS.
Chris Perry is a retired social worker who has previously worked as a director of social services for South Glamorgan County Council, a management consultant, non-executive director of the Winchester and Eastleigh Healthcare NHS Trust, director of Age Concern Hampshire and a presenter of a weekly current affairs programme on Express FM