Gavin Maclure's Musings

My take on politics locally, nationally and internationally

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Time to bust open the Energy Cartel

Profiteering: Electricity and gas prices are going up

Just as the Arctic blast arrives and we find ourselves reaching for the thermostat, the ominous white envelope  lands on the doormat. I wonder what that could be.

Ah, yes, it’s your “friendly” energy company. With all six energy firms trying to scrape every bit of profit off the bottom of the barrel, they ONLY ever spend money on writing to you when they are telling you your bills are going UP. Anything else: go online or wait three hours for a call centre agent to pick up the phone.

And so it happened this weekend when I received said letter from nPower telling me my electricity was going up by 18% and my gas was going up by 16%. But it’s not their fault you see. nPower even had three stock excuses for ramming my energy bill up by NINE TIMES inflation. The first one is the real killer:

“It’s costing us more in taxes and obligations to carry out government environmental and social schemes”

Pointless: the reason your energy bills are going up

What “government environmental” means is wind farms. The energy companies are being forced by law to invest in “renewable” energy, i.e. wind turbines that don’t turn because of a lack of wind or they turn too fast because it is too windy and therefore have to be switched off unless they break.

So instead of adding more energy to the network, wind farms add next to nothing and instead cost you and I more in additional electricity charges. This is all to meet EU-imposed Co2 emissions targets for non-existent anthropogenic global warming. This may be the wet dream of politicians like Tim Yeo and John Selwyn Gummer who are raking in cash from their various directorships of “green economy” companies but for us mere mortals all it means is a higher energy bill each month so our political elite can keep dining in Brussels. In fact, temperatures haven’t risen since 1997 and the last few winters have been perishing with the Met Office predicting another particular cold one this year.

On top of pointless green policies, which reek of a money-making exercise for the enlightened elite bordering on corruption, it is becoming clearer the big six UK energy firms may be in cahoots with each other. In other words, they may be operating a cartel. No real competition exists. Each firm puts up their charges by the same amount. If you switch, you might get an introductory bonus in the form of “cashback” but you will soon be dragged back into a punishing rate with the only option being to go through another painful switching process if you want to save a few pounds. Not worth the effort and the big six know this.

Of course, if any energy firm talks to another about their prices, they would be committing an offence under the Competition Act 1998. People can go to jail for breaking this law. My question is why are we seeing so little enforcement from the government regulator, Ofgem? Surely there is enough anecdotal evidence of wrongdoing. Ofgem did in fact start an enquiry into profiteering two years ago but since then they have gone very quiet.

Well the tipping point is coming as David Cameron saw when he quipped in the House of Commons energy firms will be compelled to give customers “the lowest tariff”. The PM then quickly backtracked when he realised the government hadn’t actually worked up a policy yet. But in any case, does he really think bills will come down if the big six are forced to offer the lowest tariff. All these profiteering firms will do is dump the majority of their price plans and offer one tariff at the highest charge they can with all six energy firms conveniently offering the same price: a big fat high price!

What we need is real competition. The market needs to be opened up to tens of more firms to dilute the influence the big six have. Currently, no free market exists and it is just another case of capitalism only working for the few, not the many.

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The banks are corrupt

It’s not as if this headline is shocking news. We’ve known it for years even before the crash of 2008. The last Labour Government knew the details of the multitude of corruption and immorality pervading the banking system during the boom years before 2008 with even a whistleblower from Barclays bank telling them the Libor interest rate charged by leading banks in London when lending to other bank was being rigged. But what did Gordon Brown and Ed Balls do with this information: nothing, diddly-squat!

I wrote in January about how Capitalism has never grown up. I re-read it today and the words are very pertinent to this week’s news that Barclays Bank and perhaps many more of our UK banks fiddled the interest rates used for inter-bank lending on the money markets to ensure traders made huge profits and also made more money out of mortgage holders and credit card consumers, as the Libor rate also propagates down to interest rates we pay on our mortgages and credit cards. This must be illegal with the prison sentences not being in single figures but double-digits: 30 years, send him down type of sentences. Prosecutors should start with the Theft Act 1968.

Like many ordinary people who work in the corporate sector in this country I am sick to my back teeth with the majority of employees getting paid a pittance for their work whilst a handful of executives and directors at the top trouser millions of pounds every year. As I’ve said before, anybody who works for a business and did not start it up does not deserve a salary of £1Million a year, and in my cases board members and CEOs of FTSE 100 companies are paid much much more. Unlike entrepreneurs like James Dyson, these FTSE 100 CEOs have never had to take a personal risk to do with the company in their careers. But still they are paid in some cases more than James Dyson can take out of his business as a salary.

Capitalism has failed to mature since Thatcher unleashed free enterprise in the 1980s. She lifted millions of people, like my mother and father, into the burgeoning middle-class and they benefited enormously from captialism. But by the early-1990s, the FTSE100 elite had taken over the system and the first thing they did was pull up the ladder and hoard all the cash the companies make up in the board room. The directors, CEOs and bankers rigged the system so only 1% of a population now benefits from capitalism – the rest of us are merely slaves to the system. But as I said back in January, I am no socialist. I love the free market and capitalism. The problem is the ordinary worker has been locked out the capitalism system for nearly twenty years and we want back in – as is our right.

The Government now must do two things in quick time:

1. Strip Barclays CEO, Bob Diamond, of his director licence thereby forcing him to step down as CEO and board member of Barclays Bank. He can then fly back to Massachusetts with immediate effect.
2. David Cameron must order a judge-led enquiry – Leveson-style – into the working practices and ethics of the banking sector in the UK.

The peasants aren’t as stupid as the finance sector elite and the Government think we are. We might just revolt unless our anger can be vented.


Today’s capitalism is a like a child which never grew up

It may come as a surprise to some of my Left-wing critics, but I am becoming more concerned by the day about the state of capitalism. We certainly don’t want to go back to the economy of the 1970s, where mass nationalised industry and crippling union behaviour brought this great country to its knees, forced us to run to the IMF and we were labelled “the sick man of Europe” by our sniggering European cousins. Thatcher rescued us from this great shame and allowed capitalism to flourish during her tenure when she introduced the free market to almost every sector with privatisations of our utilities and the deregulation of The City. Many ordinary people like my mother and father benefited enormously from Margaret Thatcher’s policies and the middle class expanded greatly under her rule to the point where hardly anyone calls themselves working class any more. Any that do seem to miss the point as they are likely to be on benefits.

But capitalism has not matured over the last 30 years. It still behaves in an infantile manner and certain immoral people have taken advantage. Bankers, CEOs, non-executive directors have spent the last 20 years lining their pockets off the backs of the low to middle income earners like my mother and father and now my working generation. Frankly, it is immoral and wrong for ANY CEO to earn £1million whilst the next high earner in the company outside of the boardroom will never go above £100,000.  Now, don’t get me wrong, £100,000 is still a huge amount of money but a) very few senior mangers outside of the boardroom will earn this and b) it is TEN times less than the CEO. And of course, the vast majority of people in a company, myself included, are earning nothing like that kind of money.

So, what makes a CEO so special? Why is he worth £1million basic salary? The answer is he is patently not. In the boom years FTSE 100 CEOs were earning £1million+ whilst their company, for example, was sitting on £20bn worth of debt. The CEO in this instance was certainly not worth a basic salary of £1million.  Bankers were trading products they did not understand, merging with companies stacked with toxic assets and yet still they were giving themselves £millions in pay and bonuses. Directors of Remuneration Committees were and still are ensuring their mate in one company is trousering a few £million a year as long as their mate ensures he will get a few £million from the company he runs. There is a word for that: corruption.

And still the vast majority of ordinary workers in companies up and down the land did not benefit from capitalism in the boom years between 1997 and 2008. In fact most hardly received above inflation pay rises during this time. The money, instead, was given to a few thousand at the top our publicly-listed companies. They then proceeded to live high on the hog and, in the case of the bankers, they had so much money they bought up properties in London every year they did not need and have effectively priced any ordinary worker out of the London housing market as a result.

We have since had an economic crash on a par with the 1930s depression. And nothing has changed on executive pay. The elite in the boardroom still take home most of the money whilst the other employees do the real work.

However, before any of my left-wing friends get too excited, let me emphasise I am still an ardent supporter of capitalism, privatisation and free-markets. In shorthand, I am a Thatcherite. But Thatcher, if she was still Prime Minister today, would be revising capitalism, modifying capitalism, maturing capitalism. She would be ensuring the great benefits of capitalism, which saw millions of families like mine become part of the burgeoning middle class, were continued to be received by us in the 21st century. As a grocers’s daughter she understood ordinary workers and saw it as her moral duty to ensure the wealth of capitalism flowed down the workforce line. Thatcher certainly did this during the 1980s but successive Governments failed to continue with this policy.

At the present time, I and millions of other workers up and down this land are patently not benefiting from capitalism. This does not mean we are going to vote for the pygmy that is Ed Miliband. No, we don’t want a something for nothing society and one that sees a free economy enslaved by nationalisation and socialism. We want to see more fruits of capitalism in our purses and wallets: the complete opposite of socialism.

How can ordinary people benefit more from capitalism in the 21st century? A very difficult question to answer. The Liberal Democrat Business Secretary, Vince Cable, has started to address the issue but only in words not deeds. I think we need to do these two things first:

1. A ratio cap. That is CEOs can only be paid a maximum multiple of a average middle manager’s salary. This multiple will be difficult to calculate but it is not beyond the wit of man to derive.

2. Employee representation on a company’s remuneration committee (which I commend Labour for proposing). In many companies, there is very much a rule for the workers in terms of performance management and reward and another for the board members. By having employees on remuneration committees a CEO will start to be treated like any other employee is when it comes to their pay – because they are like any other employee.

The above won’t be enough, however, until the big institutional shareholders such as the pension fund managers also develop some morality and ethics and start to walk the talk regarding obscene CEO and banker pay.

The Right are starting to wake up to the misbehaviour of the capitalism child. David Davis MP – not exactly a left-wing stooge – has expressed his concern about high executive pay. YouGov has also found that Tory voters want a Mansion Tax introduced on properties worth £2million or more. I’m not in favour of this. I would prefer to cut obscene pay at source by bringing some morality into the boardroom and see the additional money pushed down the line. First and foremost we need a strategy from Number 10 on how to develop capitalism for everyone again: I fear David Cameron and George Osborne don’t know how to.