Britain’s households have been reduced to cash machines for the shareholders of energy giants. For any future historian seeking to understand just how broken was the British economic model of the 2020s, the dichotomy of these two statistics requires no further explanation: £6.9bn of profits for BP – the second highest ever – while the average household energy bill is expected to reach more than £3,600 a year by winter.
This is self-evidently unaffordable for millions of British families, all too many of whom already skip hot meals to ensure their children are fed, while the only hardship shareholders can expect are hangovers from one too many champagne dinners.
That the Tories were shamed into imposing a windfall tax in May is no adequate answer for a looming human catastrophe. The extra 25% they will pay on profits only applies from three weeks ago, meaning the vast fortunes made before then will be untouched. In part, they are profiteering from war: the horrors of Ukraine and sanctions against Russia have sent prices for oil and gas surging. The killing fields of armed conflict have often proven to be lucrative business opportunities. That history often repeats this sordid enterprise makes it no less grotesque.
The energy companies know the case for a far more ambitious tax is inarguable, and so they resort to desperate spin. Higher rates will mean confiscating money desperately needed for green investment, they cry, imperilling the transition to the clean energy required to preserve human civilisation from the existential threat of the climate emergency. Don’t believe them.
For a start, despite their attempts to “greenwash” their reputations as climate fighters, the world’s biggest oil and gas companies spend more than £150m a year lobbying politicians to halt, water down or destroy policies required to tackle the climate crisis. That big energy has thrown £1m at the Tories since the last election is not the whimsical splashing around of money: it’s because they trust the Conservatives most to forestall demands for tougher action to be taken against them. This was hardly naive: witness the 90% tax breaks – for investing in fossil fuel extraction – which Rishi Sunak handed them, allowing them to dramatically slash their tax bills.
In any case, the killer fact is that 60% of their profits go directly to shareholders: none of that is funding investment in anything, let alone clean energy. Since 2010, they’ve handed out nearly £200bn to shareholders: imagine how this money could instead have been used to promote clean energy, as well as reducing household bills. “They’re not using cash to invest – and when they do invest, it’s still fossil fuel heavy,” says Mathew Lawrence, director of the Common Wealth thinktank. “It’s better to see them not as energy companies but as institutions whose main goal is managing cashflows to reward investors.”
But not all years yield such bumper profits, say the energy companies: what of the lean periods? Even then, if you average out the years, big energy is awash with cash. Their apologists’ opposition to a sweeping tax becomes ever more desperate: such as claiming it will hammer pensioners, a point comprehensively rebutted by Common Wealth’s research which highlights that the main pension funds own less than 0.2% of BP and Shell’s shares . And would anyone consider Norway – which enjoys one of the highest standards of livings on Earth – to be financially reckless. Yet its permanent windfall tax – worth 56% on top of corporation tax – means that for every £100 they collect from barrels of oil in the North Sea, Britain collects just £8.
While being coerced by popular pressure into imposing a more drastic tax on the energy companies is the most we can expect under Tory rule, that does not mean it should be the limit of Labour’s ambitions. When Keir Starmer was asked on national television during the 2020 Labour leadership race if he supported renationalising energy, he stuck his hand up, only later to renege on this promise, along with so many of his other campaign commitments. But taxes only offer temporary redress, rather than dealing with a structurally broken industry which should never have been surrendered by the government to profiteers. How can it be that Britain is one of only two European nations to have entirely flogged off its transmission grid , for example, with National Grid frittering away £1.4bn in dividends to shareholders in 2021 alone, instead of using it for investment?
French president Emmanuel Macron can hardly be construed as a leftwing firebrand, and yet his government is taking full control of the already mostly nationalised EDF energy firm. Because it’s publicly owned, the government could simply order the company to take a £7bn hit to protect families from a cost-of-living crisis by limiting bill hikes to just 4% this year. As pro-public ownership organisation We Own It highlights, academic research points to energy prices that are up to 30% lower under public ownership – here is an obviously viable long-term solution.
A social order which robs struggling households to shove astronomical dividends into the bank accounts of well-to-do shareholders is irretrievably broken. Conservative leadership frontrunner Liz Truss’s position is to denounce failed economic orthodoxies that have prevailed for years, concluding that the problem is that taxes are too high on big business – rather than, say, energy companies bleeding British families dry. Her blind refusal to acknowledge the reality speaks to a political party inhabiting a parallel universe. Britain’s energy industry should never have been reduced to a cash cow for profiteers. At the very least, our frontline politicians should be shamed into raiding these super-profits to offer their citizens a life raft. As it is, they’ve been left to drown.
Owen Jones is a Guardian columnist