Soaring prices have again reignited one of the long-running debates in British politics: should the energy companies be re-nationalised? The Trades Union Congress (TUC) certainly seem to think so, having produced a pithy film which purportedly compares the two sectors in the UK and France. It features a rather baffled looking Brit and a smug looking French girl.
The former claims ‘in Britain, billions in profits go to private energy companies’; the latter that ‘in France, the profits go back to EDF, which is publicly owned by the French people so the profits go back to us and keep the bills lower.’ They contrast the 54 per cent increase in bills in the UK this spring with the 4 per cent with that in France. On this basis, it is argued, Britain should re-nationalise the energy sector to pass such ‘profits’ back to the people.
Yet this comparison with the French system does not in fact tell the full story. For the decision to increase bills in France by just 4 per cent came at a cost; a cost of £7 billion, which is incurred by EDF and, indirectly, the French taxpayer. The price cap announcement by the French government caused EDF to lose a fifth of its market value over the course of a single day, a move that will cost the everyday French citizen, even if they do enjoy lower energy bills.
The cap forced EDF to sell power to rivals at a discount to try to shield French consumers from sharp increases occurring elsewhere around the world. This was a major strain on EDF’s finances because the group sells forward its estimated nuclear output before the end of the budget year and has to buy back sold electricity in a volatile market with prices at historic highs.
Moreover, for all the TUC’s talk of ‘profits’, EDF debts are projected to rise 40 per cent this year to more than £51 billion, all of which is now a taxpayer liability. And, rather than being some kind of magic cash cow for the state to milk, EDF is, in the words of Reuters, ‘a major headache owing to years of delays on new nuclear plants in France and Britain.’
Taxpayers are even going to have shell out a further £5 billion to buy the 16 per cent of EDF not already owned by the state to try to fix its issues, which have seen the value of EDF slump from 33 euros a share in 2005 to close to 11 euros today.
Nationalisation of the British energy industry might have its benefits but the TUC and others making this case ought to be honest about the costs it involves too.
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