By Yuri Prasad
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Privatisation of gas and electric stands behind today’s shocking rises

Big investors hoover up the profits from energy firm British Gas—while people like pensioner Sue struggle to pay them
Issue 2807
Suited Britush Gas bosses and someone dressed in a flame costume walk to the London stock exchange on 8 December 1986 following the privatisation of the energy firm

British Gas bosses and friend march to the stock exchange on 8 December 1986 for its first shares trading following privatisation of the energy firm (Picture: John Sturrock)

The one-off payment to some households promised in Rishi Sunak’s windfall tax on energy companies will only mean temporary, limited relief to people like pensioner Sue Conner. The regular trip outside to check her gas and electric meter is one she dreads.

Sue, who lives alone in a small flat in Walthamstow, east London, fears the remaining amount of credit will be less than she expected. She will then try to find money to “top up”, but that’s not always possible. “I charge my prepay card up when I get my pension,” she told Socialist Worker. “Then I try and make it last a whole month. But it’s getting harder as prices go up.

“I’ve gone down from a shower every three days to one every four days. And I only use the oven when I’m making a dish that will last for several meals. Thank goodness for the warmer weather because now I can just eat cold food.”

Sue’s gas and electric supplier is British Gas, the once state-owned firm sold off by the Tories in 1986. Margaret Thatcher presented privatisation as a way of sharing ownership of utility firms among millions of people—she described it as “popular capitalism”.

It was always a nonsense. Big investors hoovered up most of the shares at knockdown prices and then trousered the profits. In the first 12 years after privatisation British Gas shares increased in value by over 12 times.

Meanwhile, the average rise on the stock market shares during that time was just 3.5 times the initial value. Most people who bought a small number of shares in 1986 sold up as the market soared.

Today, Centrica owns British gas. Its boss, Chris O’Shea says he understands how people such as Sue feel about the rising cost of living and so this year has forgone his £1.1 million bonus. But don’t worry too much about O’Shea, he’ll get by on his £775,000 salary.

Don’t fear for his shareholders either. Centrica says British Gas Energy saw a 44 percent jump in profits to £118 million last year. Its parent company smashed forecasts by posting a £948 million group profit.

They may have to wait for their dividend but the shareholders’ pay day is coming. Behind Centrica stand all manner of vulture capitalists.

Asset management firms Schroders and Abrdn, as well banks such as Bank of New York Mellon Corporation (BNY Mellon) are all heavily invested. They take money deposited in pension funds and personal investments and place it in big firms they know will make large profits for years to come.

Often they tell their clients they are investing their money in “eco‑friendly” ways—but British Gas could hardly be described as that. No wonder the US Securities and Exchange Commission has just fined BNY some £1 million for misleading claims about the environmental and social criteria its investment funds use.

Centrica is one of the firms pleading against a windfall tax set against its monumental profits. They say the move will hit investment in “home-grown energy supply”.

But to Sue, who knows that her energy bill has gone up by 60 pence a day, the bosses’ worries mean nothing. “I keep the lights off in the evening nowadays and I’m always feeling the cold,” she said. But you know there are pensioners on this street that have got it harder than me.”

Banks and investors are cashing in too

The Tories promised that home energy privatisation would mean competition—and that in turn would drive down bills.

But now most small energy firms have gone to the wall, leaving the “Big Six” firms to dominate nearly 80 percent of the energy market. With this near monopoly, prices and profits have gone through the roof. Just as with British Gas, parent companies and investment firms are raking in the cash.

Scottish Power is owned by Iberdrola, which itself is part owned by the Qatar Investment Authority and investment firm Blackrock. Energy supplier SSE is part owned by Invesco and Blackrock. Since 2000, Blackrock has been fined over £19 million in the US for financial and employment-related offenses. Invesco was in 2014 fined more than £18 million by Britain’s Financial Conduct Authority.

Meanwhile, E.ON UK is part owned by German energy giant RWE AG, and investment firms Capital Group and the Canadian Pension Plan. Only EDF energy breaks from this pattern. It is owned entirely by the French government.

For the Big Six, keeping profits high means keeping taxes low. Between 2011 and 2020, the six paid a combined £3.87 billion in British taxes.

Over the same period they handed out £22.98 billion in dividends to shareholders. Now tax payments are falling. Between 2016 and 2020 the effective tax rate on the Big Six dropped from 18 percent of pre-tax income to just 13 percent.

Instead of allowing energy giants to funnel these growing profits to global investment firms, we could instead demand they be used as part of a drive towards green energy and to lower household bills.

That needs action far more radical than the limited “windfall tax” proposed by Labour and this week begrudgingly accepted by chancellor Rishi Sunak. Instead, it would mean the renationalisation of the entire industry, and giving workers and the public a real say in how it be run.

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