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Sunday, November 21, 2010

Britain: Paying the cost of greedy firms

This piece of mine appears in the Sunday Express.

DID you think Britain was an expensive enough country to live in?

If so, I’m afraid I’ve got some bad news for you. Over the next few weeks things are going to get a whole lot worse… Take energy prices. On December 1, Scottish and Southern Energy, Britain’s second biggest supplier, is raising gas prices by 9.4 per cent. Ten days later British Gas is putting up its gas and electricity rates by seven per cent. Household bills will go even higher from January 1 as VAT rises to 20 per cent. Just what we need to get the New Year off to a good start.

Whenever they raise their prices, energy firms trot out the line that its very poorest customers will receive “extra help” but what about the millions of hard-working Britons who, while not actually living in poverty, can in no sense be regarded as being well-off and will be hit hard by the planned increases? Then there’s train fares. Britain’s railways are already the most expensive in Europe and fares will rise again by as much as 10.8 per cent on some commuter routes from January.

Everywhere we look, prices of things we can’t really do without are rising at far higher than the official 3.2 per cent rate of inflation. Food prices rose by more than five per cent in September, four times the Eurozone average. Petrol prices rose by 2.1 per cent a litre between September and October, while the average price of diesel has risen to £1.23 a litre, its highest this year. The rise in global cotton prices also means dearer clothes. Retailer Next has warned prices are likely to go up by eight per cent in the coming months.

Such above-inflation increases in essentials would be bad news at the best of times but they are coming at a time when the Government is trying to make us accept below-inflation wage increases… if we’re lucky to get any wage rise at all.

THE Prime Minister has so far been successful in persuading people that sacrifices must be made if the state of our public finances is to be improved. Until now, Britain has avoided the large public demonstrations that countries such as France and Greece have seen in reaction to austerity programmes but unless the Government acts to reduce price increases of essentials, this goodwill could soon evaporate. Far from being a helpless bystander, there’s much the Government could do to alleviate the situation. Regarding the railways and the utilities, the best solution would be to bring them back into public ownership. With no shareholder dividends to be paid, prices could be reduced to the European average, bringing relief to long-suffering commuters.

In Belgium, where railways are still owned by the state, fares are up to 20 times cheaper than in Britain. At weekends, prices actually drop by 50 per cent, making it easier for friends and families to visit each other. Railways are a natural monopoly and it is much better for consumers if they are in public ownership. If renationalisation does not appeal to David Cameron, then he has other options. The Government could order utility and train firms not to increase their prices above inflation.

Regarding petrol prices, fuel tax could and should be cut. In recent years it has risen at more than double the average rise in 10 European countries and is due to go up again in January. There’s also still time for Chancellor Osborne to postpone his planned VAT rise, too. The Government could also take a leaf out of the book of a previous Conservative government and re-establish the Prices Commission.

The original commission was set up by Edward Heath’s government in 1973 as part of its anti-inflationary strategy. It was continued when Labour came to power in 1974 and achieved success in keeping rises down.

A new commission would have the power to investigate planned increases in basic commodities and if held to be unjustified, could order firms to scrap planned rises.

Such a case would clearly apply to the recently announced hikes in energy prices. Just a few days after British Gas unveiled its seven per cent rise in gas and electricity tariffs, we learnt that the operating profits of Centrica, its parent company, were likely to exceed £2.2billion for 2010.

Meanwhile, SSE is paying its shareholders a half-year dividend of £452million, up 6.7 per cent on last year. In 2008, Britain saw the highest energy price rises in Europe, more than four times higher than the average. OUR privatised utility companies are putting the interests of their shareholders before those of their customers. They operate as an effective cartel, raising prices in tandem when wholesale prices rise but being reluctant to cut them when they fall. After the latest unjustified hikes, coming just before the festive season and the onset of winter, it is time for British consumers to say enough is enough.

The Government has asked us to tighten our belts and accept the new age of austerity but it can’t expect us to sit back while the price of things we can’t do without is allowed to go through the roof.

Over to you, Mr Cameron.

1 comment:

jock mctrousers said...

" special help for their poorest customers" ? Pull the other one. What does that mean? Meters? Which charge the poorest far more for their electricity than anyone else.