Edited by Sam Thielman
SOUTH LONDON — I must be among a small minority of people still grateful for a spur-of-the-moment pandemic purchase.
In summer 2020, after the UK's initial lockdown ended, I bought an outdoor gas burner—one of those overkill units intended for stir-frying at the highest possible temperatures. It runs on propane and we mercifully have enough outdoor space to operate it. It’s going to be a lifesaver if, as some government sources recently predicted, the UK experiences rolling blackouts and gas rationing this winter. Thanks to this thing, my wife and I can boil water with which to bathe, or to fill hot water bottles, or to cook. I have a little extra capacity where the energy market doesn’t.
The UK government has of course reassured people that rolling blackouts are ‘unlikely,’ despite the fact that we may very well not have enough natural gas to provide heating and electricity to businesses or even households this winter. Fossil fuel prices have reached record highs this year, supplies are low, the Russian pipeline supplying continental Europe is currently down for maintenance, and consumer utility costs in the UK have skyrocketed.
This might seem unsurprising to anyone who’s paid attention to the situation in Europe since Russia’s invasion of Ukraine in February, but Russian gas makes up only about 2.5 percent of British natural gas supply. In fact, the UK produces about half of its supply domestically via its North Sea oil and gas fields; imports about 40 percent from Norway via a pipeline; and receives the rest from LNG terminals and smaller pipelines from the continent. But it has next to no long-term storage of gas, as private companies have downsized and closed much of Britain’s storage since privatization.
Thus, current gas prices have caused energy companies’ profits to soar. They're earning ten- or eleven-figure quarterly profits on the back of high fossil fuel prices. The circumscribed ideological imagination of the Conservative Party’s current leadership (like our opposition Labour Party’s) does not allow for anyone to ask if they ought to, or if they could possibly not.
So, the crisis in the UK is twofold: a fully privatized utility market; and the selling-off of the emergency storage it used to keep on hand. Anywhere you go in this country, you’ll see the enormous metal frames that used to hold gas storage tanks back when the state thought it wise to maintain a reserve. The argument was that they were inefficient, and now they’re either empty or dismantled altogether.
Call it Thatcher’s legacy, call it just-in-time supply chain for absolute life necessities, call it the neoliberal chickens coming home to roost. Chances are good that, this winter at least, we’re all pretty screwed—even people who can afford to pay.
ON FRIDAY, the UK’s energy regulator, OFGEM, announced that household utilities will rise in October to £3,549 (about $4,200) per year, or about 11 percent of the median UK household disposable income. The UK’s Office of National Statistics defines disposable income differently than you might expect–it means income after taxes, but before deducting any cost-of-living expenses. This increase represents an 80 percent increase from April’s cap, which was itself a 54 percent increase on the previous year.
This is a disaster for working people. For a person employed full-time at minimum wage, household utilities are now about 19 percent of their disposable income. For someone on the minimum state pension (the U.K. equivalent to the American Social Security program), it’s about 36 percent. And energy rates are set to rise again in January, this time to an estimated £4,210 per year—18 percent more than the exorbitant October rate. If the figure of 18 percent sounds familiar, it’s probably due to the fact that Citibank analysts expect consumer price inflation in the U.K. to hit 18 percent in January.
Anecdotally, I’ve seen stories on social media of people getting notice that their monthly utilities direct debit will increase to more than they earn in a month. There’s a widely-shared article on the BBC’s website about a restaurant in Scotland that saw its quarterly gas bill rise from £900 to £10,000 overnight. (Commercial utilities don’t have an annual cap.) Reports from UK business coverage seem quietly apocalyptic: 70 percent of pubs to go bust over the winter; 53 percent of small businesses expect to stagnate, shrink, or close. The government wants to reassure people, but—at the risk of sounding like a Facebook comments section under any public health announcement—it feels inadvisable to trust them.
PRIVATIZATION OF UK UTILITIES and public services is a relatively new phenomenon. Our gas network went private at the end of 1986, our water supply in 1989, our electric grid in 1990, our railway system in 1993, our postal service in 2013. These all took place under the Conservative Party premierships of Margaret Thatcher, John Major, and David Cameron, but fealty to privatization is at this point a cross-party position in our politics. I say ‘our,’ but I’m a foreigner here—I’m from the US and moved here in 2018—and there’s a part of me that often wonders if I’m going crazy when I encounter the way things get done here (I suppose this is how Brits must feel the first time they get a bill from a doctor’s office).
Navigating the utilities system is a source of endless frustration. As in the US, there’s an actual provider (equivalent to, say ConEd or your municipal water company), but there are dozens of energy retailers who serve as mandatory middlemen. In my case, gas comes to the boiler in my home via infrastructure that Southern Gas Networks PLC maintains, but I don’t pay Southern Gas Networks. I have to tick down a list of commercial retailers and choose from a list of available marked-up options, companies like France’s state-owned EDF, for example, except none of these companies are actually providing service. They’re a forced layer between the consumer and the operator, and since early 2021, over 30 of them have gone bankrupt. In one case, a clean-energy provider called Bulb went into special administration, which essentially allows a private company that provides vital infrastructure to keep operating despite being insolvent. Recent reports estimate that the total cost to the government of the Bulb bailout will be £4 billion (about $4.7 billion USD). By contrast, Britain’s Trades Union Congress estimates that nationalizing the five biggest energy suppliers would cost the government £2.85 billion.
If you think this is absurd, you’re correct. If you think this government, or the government proposed by our opposition Labour Party, is going to choose the lower cost of nationalization over sinking endless money into private operators, you are sadly mistaken. Labour’s big policy announcement was that it would propose a freeze on the price cap, and would use government funds to pay the private energy companies the exorbitant difference.
This probably seems familiar if you’re an American. We’re used to bailouts and tax cuts going directly into the hands of shareholders and executives. We’re used to an unconvincing appeal to collective sacrifice that miraculously spares those with the largest share of wealth and political power. We even have a specific example of the same kind of utility price shock in the case of the 2021 winter storms in Texas, and of politics that blames the victims while safeguarding obscene profit margins. We’re a country where hospitals feel comfortable charging a new mother $40 to hold her newborn baby.
But in Britain’s case, the government seems to be walking quite confidently and assuredly into a crisis that could end in catastrophe. Britain’s wages have less purchasing power when adjusted for inflation than they did in 2008. This country has experienced a lost decade-plus featuring cost-of-living spikes, a decades-long housing crisis, economic degeneration outside London, dismantling of state reserve capacity, near-total right-wing ideological capture of media, and attendant increases in political violence. This is a country where an estimated 33 percent of children lived in poverty before the cost-of-living crisis began. A recent analysis claimed Britain ran the risk of becoming an emerging market economy, which is an awkward way of saying that the fifth-wealthiest country on earth is so dedicated to neoliberal ideology that it may in fact collapse its own economy in the next six months. I get it, ‘emerging’ is a euphemism, but I feel like it means the literal opposite of what’s actually taking place.
I have no idea what this winter will bring. In my experience of Britain so far, there’s zero chance they stop it before it gets bad, and about fifty-fifty that they intervene at all once there’s a full-bore crisis. What I do know is that I’m glad I have that propane tank in reserve, because I genuinely cannot tell you whether the power and heat will stay on, or whether anyone in power will acknowledge this until it’s too late. I genuinely hope I don’t have to use my silly impulse buy this way, but the fact that I have it is the only assurance I’ve got. According to Britain’s dominant economic orthodoxy of the last 43 years, everything is operating as it should be. Living at the sharp end of it, I’m not particularly convinced.