In late 1973, Edward Heath called a secret Chequers meeting for the chairmen of BP and Shell. Facing the Arab oil crisis, soaring inflation, and striking miners, Broadstairs’ favourite son wanted the two companies to not cut their supplies to Britain as they planned to do for the rest of the world. The British state owned at least 40 percent of both. Surely, Heath thought, he could rely get these two chaps to do right by their fellow countrymen?
No dice. Shell, being owned 60 percent by the Dutch, were not wooable by tepid English hospitality. BP’s chairmen indicated that such a move would see the company’s sections in France and West Germany nationalised. Wanting to avoid a row with his new bedfellows in his sainted Common Market, Heath backed down. His plan was unreasonable and unworkable. But at least he tried to do something.
Today, we face an energy crisis of similarly terrifying proportions. This crisis comes as an aftershock to others: Covid, spiralling inflation, and Russia’s invasion of Ukraine. It has two inter-linked elements: surging costs of energy bills for consumers and potential energy rationing and blackouts this winter. If action is not taken urgently, the prospect is raised of widespread energy poverty, economic stagnation, and a serious breakdown in law and order. All of which won’t be dandy for Tory prospects.
Yesterday, the consultancy Cornwall Insight made headlines with their prediction that the energy price cap would reach more than £4,200 early next year. The cap is £1,971 now and expected to hit at least £3,300 in October. For context, it was £1,138 April last year. This is a rise that millions simply can’t pay. Mass boycotts or mass defaults – they amount to the same thing. To prevent the system collapsing, huge intervention by the Government will be required to pay peoples’ bills.
Ministers also face the prospect that this winter might see the lights go out. As James Forsyth has highlighted, we are better positioned than most of our European neighbours as we rely less on Russia for our gas. But we do so by relying disproportionately on Norway. This week, they announced they will prioritise refilling domestic reservoirs over exporting hydropower to the UK. We import vast quantities of energy during the winter. If Norway, Belgium, and other providers begin limiting supplies, we will face shortages.
And so, as skies darken, temperatures chill, and Noddy Holder shrieks out of our radios, Downing Street’s latest temporary resident will face a situation analogous to Heath’s tangle with the Three-Day Week. Germany faces a reduction of 20-30 percent in gas supplies as Russia tightens the screw. Industry is being asked to make huge reductions in gas use to protect consumers, care homes, and hospitals. There is not yet any suggestion that the situation will get that bad here. We will see.
Costs and disruption will be disastrous as we diminish further into recession. The prospect of millions being unable to pay their bills is simply unprecedented. As ever, our columnist James Frayne was ahead of the curve. He has raised the spectre of vast numbers of those on middling to lower incomes choosing not to pay their bills. Since then, this feeling has manifested as the anonymously-run Don’t Pay UK campaign. It aims to have a million signed up to cancel their direct debits by October if bills aren’t cut.
They currently have 94,000 signatures. Matthew Lesh of the Institute for Economic Affairs had an excellent rundown yesterday of the campaign’s flaws. As well as giving false hope to many vulnerable people, it will lead to boycotters seeing late payment fees, visits from the bailiffs, and even having their energy cut off. By focusing the public’s ire on the energy companies, it also ignores consumers’ ability to contact their suppliers for help. The situation is grim, but not hopeless.
Nevertheless, whilst Lesh is right to point out the campaign’s flaws, I feel he almost underplays just how serious a problem these boycotts could be. The comparison has been drawn with the socialist frothing against the Poll Tax. In their minds, leftie campaigning was to blame for up to 30 percent of ratepayers in some areas failing to cough up for Thatcher’s folly. Unsurprisingly, their take on history is not wholly accurate.
Instead, as more and more ratepayers became aware of the inefficiency of local councils in collecting the tax, increasingly large numbers chose not to pay. Local councils were ineffective in enforcing payment with so many not doing so. Failures to register, endless efforts at hauling people to court, and subsequent non-compliance meant that by November 1990, South Yorkshire policy admitted that they planned not to arrest even those defaulters that they had been told to do so by the courts. It was simply “physically impossible”.
Fast forward to today. If a similar phenomenon develops, the energy companies, the justice system, and the Government will be physically unable to cope. In a country where petty crime has effectively become legalised, who fears a ticking off from British Gas? Unlike in 1990, the Government cannot simply introduce another tax or borrow more to replace a failed policy. The energy companies are private companies. If people don’t pay, it is a genuine crisis of capitalism.
What can be done? One could imagine Boris Johnson imitating his predecessor, calling the energy bigwigs to Chequers and imploring them to act. But it would be pointless. Only 3 percent of energy bills comes from their profits, and they face the collective problem of spiking wholesale prices. Anyway, Johnson is currently more interested in playing Top Gun and Dad-dancing than in managing this crisis – especially as he will be out of Number 10 before the full impact of these bill hikes hit. Why should he care?
So the challenge will fall to his successor. The problem for them both is that neither really understands what the public are demanding. Truss wants to do too little; Sunak wants to act too slowly. In suggesting she opposes further handouts and will prioritise reversing her rival’s rise in corporate taxation, Truss appears not to have grasped the scale of the coming problem. But Sunak’s desire to wait until October to announce further action ensures two months where support for boycotts can grow. His Treasury-brain won’t compute that speed is a necessity.
Polling from Public First suggests the public wants a scale of government intervention comparable to that of the Covid pandemic. They will be outraged if their new Prime Minister prioritises cutting taxes on big businesses whilst they cannot heat their homes. They will not give a flying fig if MPs are babbling about the Laffer curve whilst they can’t feed their kids. They understand that the £15 billion package announced by Sunak in May does not cover the rise – if they think about it at all.
Yes, another huge bout of government intervention could lock inflation in for the foreseeable future, potentially trapping us in a seventies-style wage-price spiral. But we have already seen Sunak stand up in a national crisis and tell us he would do “whatever it takes” to get us through it. And the apparent £30 billion windfall from higher tax receipts that Truss to blow on appeasing backbenchers will have to be directed towards further handouts. It is better to acknowledge this now than be forced into a humiliating u-turn once in Downing Street.
But our next Prime Minister will enter office amidst crisis, disillusionment, and with a British state barely able to fulfil basic tasks. They will not, whatever their hopes, reverse our obvious decline. They are fated to be a Heath, not a Thatcher. They must try their best and be seen to fail. They must wake our stagnant party up by showing it the scale of the challenges we face. And then, and only then, might we have a leader ready to do what is needed to fix our broken country.