The news that Centrica, the parent company of British Gas, made £1.3 billion profits in the last six months, more than the £262 million it made in the same six months last year, infuriated many in UK who are not looking forward to a 77% increase in their energy costs from October. Shell has made record profits too and there are calls for further “windfall” taxes, even though Rishi Sunak has just announced a windfall tax on energy companies which started on July 14th. An extraoridinary tax on profitable companies, is a knee jerk reaction designed to placate potential voters, however, it does nothing to address the root problem.
In the case of energy in UK, the root problem is that the unit cost is becoming unaffordable to millions of domestic consumers, but, more importantly, very high unit prices are causing thousands of small business owners to throw in the towel and call it a day. Tens of thousands of small businesses in the UK are now on the brink of collapse and it is this problem that seems to have escaped the attention of the British Government. To be honest, Governments in UK have long abandoned small businesses, preferring instead to look after large corporations who employ thousands. But small businesses in the UK employ over sixteen million people or 60% of UK’s workforce. If the small business sector collapses, that will signal the start of a recession in the UK economy.
It is now time to address directly the problem of high unit prices in the energy market. Prices need to fall fast. Trimming VAT off domestic bills does nothing for small businesses. Green levy cuts shave tiny percentages off the overall cost. No, it is time for the Government ot take over the energy sector using emergency powers. The Government needs to nationalise supply and demand lower prices from the generators. The UK energy market is too fragmented, and a monopoly on supply will drive prices much lower. If the energy generators refuse to lower prices, then the Government can nationalise energy generators too. We also need to introduce rationing of energy supply and only the Government would be able to implement this. Renewables are cheap, but it is fossil fuels that make up the shortfall in supply and charges by the generators are mostly extortionate. Rationing electricity supply will reduce demand for fossil fuels and will therefore reduce wholesale prices.
So, the Government needs to step in and take firm action. This should have been done at least six months ago, but, with a KWh of electricity due to hit 50p, for domestic users, from October, the Government has now run out of time. Business users have no cap on the rates that suppliers can charge, large businesses can claim discounts for high usage, but small businesses are being shafted and many will go bust. Whoever is PM in September, be it Liz Truss or Rishi Sunak, they will need to have energy prices at number one on their “to do” list.