The British economy is being thrown into a sudden and profound crisis this week as rising gas prices wreak havoc.
There is now a grave risk of panic spreading into other industries in a ripple effect, in ways that are similar to the banking crisis of 2007. Food production is threatened, and many more industries could suffer.
The crisis began as number of smaller home energy suppliers went broke in the summer.
Many more now face closure. Their collapse could now spread to threaten even the biggest firms in the energy supply market.
Ministers have been warned that out of 55 companies in the industry, only between six and ten could be left standing by the end of the year.
This calamity is the end product of privatisation and de-regulation of state-owned utilities pushed by Tory and Labour governments.
Margaret Thatcher’s government floated British Gas and the regional electricity boards on the stock markets in the 1980s on the pretence of creating a “shareholding democracy”. In reality, the big investors piled in quickly to grab the profits.
The smaller companies that are now in so much trouble later cast themselves as “rebels” against the biggest firms.
Without the burden of big offices and staff, they were nimble and efficient operations, they said.
They also insisted that, unlike the “big six” providers, they didn’t need large financial reserves to buy energy long in advance.
But that meant buying at current market prices, and taking a huge financial gamble on wholesale gas prices staying low.
For a time, this allowed them to undercut rival firms to offer the cheapest household energy deals.
And, for a time, their owners got spectacularly rich. Government ministers repeatedly told us that this was an example of the free market at its best, and that competition was in the interests of everyone.
Price comparison website businesses grew plump as “consumer champions” told us to switch regularly to get the cheapest deals.
But as wholesale gas prices rose sharply this spring, many smaller firms could no longer afford to honour the “great deals” they had offered customers. So they went to the wall.
Now, the energy supply industry which so loved the market has its begging bowl out—and it’s us they expect to cough up.
Bosses want the Tories to create a publicly-owned “bad bank” to absorb the debts of smaller firms, and allow the bigger ones to survive. The debts there would be underwritten by our money.
They also want billions of pounds from the government to support their “healthy” businesses if they take on loss-making customers of failed firms.
And they want the government to remove environmental levies that are designed to help people pay for more energy efficient homes.
Instead of bailing out the big firms that have made billions by fleecing the public, the whole sector should be taken into public ownership.
The shareholders and bosses shouldn’t get a penny.
It could be the start of taking control of the entire industry—and using it to keep people safe and warm without fearing their heating bills.
And it could herald the transition to a new green economy that we so desperately need.
Contagion raises further threats of food shortages, price rises and hunger
The gas price spiral is quickly spreading to other industries and deepening the sense of crisis.
Already the stock market is being hit as investors get nervous.
It shows how the anarchy of the free market threatens to unleash panic—and for some, the threat of hunger as food prices rise.
The collapse of a number of gas-dependent fertiliser firms in recent weeks has led to a shortage of carbon dioxide.
The gas is a by-product released when making ammonia used to enrich soil. It is sold on to the food industry where it is used both to stun animals before slaughter, and also as a preservative.
Firms in Ince, in Cheshire, and Billingham, in Country Durham, closed last week.
Another big firm in Norway also closed its doors. Food industry bosses were quick to use the crisis to demand more state support and rule changes for their industries.
The 2 Sisters group, Britain’s biggest chicken producers, have warned the meat industry is now at “breaking point” as the carbon dioxide shortage hits.
They were backed by the British Meat Processors Association.
It says only an estimated 14 days of supplies are left and that some companies would have to stop taking animals and close production lines.
And Iceland supermarkets boss Richard Walker said, “This is no longer about whether or not Christmas will be OK.
“This could become a problem over the coming days and weeks, so this is this is not an issue that’s months away.”
Whether or not their talk of a food shortage becomes real, the crisis raises a big question. How much longer can we allow the free market to dominate food production?
The pursuit of profit already means that many people struggle to fill a basket for their weekly shop.
And the methods of production used to line shareholders’ pockets mean worse quality food, terrible conditions for animals and environmental destruction.
At every stage, food producing bosses are looking to cut corners while supermarkets have seen their profits soar during the pandemic.
Capitalism is showing us that production without democratic planning means disaster, and that crisis in one sector of the economy can quickly spread to another.
That’s why we need to fight to replace the whole rotten system.