Cllr Robert Alden is the Leader of the Conservative Group on Birmingham City Council.
“Britain needs Great British Energy. A new publicly owned, clean power company for Britain” says the website of Labour’s new proposal announced recently.
An innocuous enough statement, unless you’ve experienced Labour’s publicly owned energy companies created by some Councils in the last decade.
Already the Labour Leader, Sir Kier Starmer has had to admit that GB Energy will not in fact generate any energy. It is unknown currently if it will sell energy, in the same way as Nottingham and Bristol Council attempted to create energy companies previously. Or if it will simply be an ‘investment vehicle’ duplicating what other parts of the UK government already can and do.
For those who have yet to investigate GB Energy’s new website, you will find little in the way of detail of how it will operate. However, you will find some very large claims for outcomes.
A map of Great Britain and Northern Ireland (yes GB Energy also covers Northern Ireland, one can only assume the name UK Energy didn’t test well with focus groups!) reveals that Labour think they will deliver 656,500 new jobs in the energy sector.
Interestingly according to the Welsh Government, there are currently only 8,300 people working in the energy industry directly. Yet Labour are claiming they will create a further 29,000 jobs. For context, the 2023 UK Energy in Brief report by the Government highlights that currently approximately 166,400 people are employed directly in the Energy Industry, while the trade body suggests that 743,000 people are employed directly and indirectly in the Energy Industry.
It is against this background that the claims by Labour that their GB Energy firm will deliver 656,000 extra jobs across the UK should be considered. This would be a near doubling of jobs working directly and indirectly in the energy sector. It is highly questionable as to how deliverable this would really be over the short to medium term.
Turning to the funding model for GB Energy leaves even more unanswered questions. The website states Labour would “Capitalise Great British Energy with an initial £8.3 billion in the first Parliament”. According to the Department of Energy Security and Net Zero in 2022 alone, £16.7 billion was invested in the energy industries. In this context, the additional £8.3 billion over 5 years is unlikely to be groundbreaking unless it is carefully and astutely applied.
How much of this £8.3 billion will actually end up being invested is also open to much debate. It certainly won’t pay for 656,000 jobs in the energy sector, that much we do know. The average wage in the sector is £38,900 according to Glassdoor, which means the yearly costs of 656,000 jobs would be over £25 billion. Labour have stated they will be creating headquarters in Scotland therefore the costs of running and staffing this headquarters will have to come out of the £8.3 billion before a single pound has been invested in any new energy or other outcomes the website claims will happen.
One of those other outcomes is claims about the number of homes that will be upgraded, again helpfully broken down by region, however this time with only estimates for regions other than in England. Taking the lowest point of those estimates this is still around four million homes that will be upgraded. The most recent English Housing Survey technical report for 2021-22 states that the “average cost of upgrading a home to EPC C is estimated to be £7,529”. Applying this figure to the number of houses they are proposing to upgrade leaves a bill of over £30 billion. Again, far in excess of the claimed cost of GB Energy of £8.3 billion over the course of the parliament.
In reality, it seems pretty clear that Labour’s GB Energy will either fail in the claimed goals, or will require significantly more cash than is being admitted by the Labour Party currently, meaning much higher taxes for residents, or indeed both of these things.
For those wondering if Labour have a track record on energy, that could mean they could deliver, when the numbers say they can’t, it is worth looking at what Labour Councils have done over the last decade. Robin Hood Energy established by Labour-run Nottingham City Council in 2015 and Bristol Energy set up by Bristol City Council, also in 2015, are prime examples of what fate may meet the taxpayers of the UK.
In both cases, it didn’t take long for the Councils to realise they had neither the expertise nor the sufficient capitalisation required to be setting up Energy Firms. This was sadly not realised in time to prevent huge costs being passed onto taxpayers.
In September 2020 it was announced Robin Hood Energy was shutting down with the loss of 230 jobs after losses of millions of pounds. Nottingham Council sought to recover money by selling the assets the firm had, its customer base of thousands of homes, which was bought by British Gas. However, even after recovering a reported estimate of £26 million for these, leaked files suggested Nottingham Council taxpayers were left holding losses of £38.1 million for this brief five-year venture into running an Energy Company.
In 2020 Bristol Council had to sell its energy company Bristol Energy for £14m and its business accounts for around £1.5 million, over £20 million less than the Council had invested into the firm. During this time Bristol Energy posted losses of £32.5m. Sadly this was not the end of the story for taxpayers as Bristol Energy’s purchaser was Together Energy, partly owned by Warrington Council. The Financial Times reported at the time that the Warrington Council had up to £52m worth of exposure to the firm.
While a Labour Government is likely to be able to provide GB Energy with the real capitalisation that is required, this is not free money. Rather, whether directly from taxation now or by increased borrowing requiring increased taxation in coming years to repay, the money that Sir Kier pumps into an Energy Company will come from taxation and it is likely to have to come from more than just additional ‘windfall taxes’ on energy companies. That means that even if GB Energy leads to lower direct bills in the long term, we will all still be paying more overall as some of the cost of that energy will have been transferred to the Treasury and so to all taxpayers.
Labour’s additional claims that GB Energy will provide energy security seem either wishful thinking or deliberately misleading. As already covered the company will simply lack anywhere near the capitalisation required to make a major dent in the energy sector and the money it does have is also allocated to other wider priorities as well, which they have made clear. There is no suggestion of how in just a few years the skills and planning permissions required will be delivered to provide new UK energy-based production in the timeframes they propose. While there is also no grasp seemingly that if it turns out all GB Energy does is invest in existing energy firms then this will make little difference to energy security of the nation in terms of ownership.
The reality is the ceasing of North Sea Oil use is in the short term likely to lead to increased energy insecurity, the opposite of what they claim the plans will deliver.
Over the last three decades, the UK has been leading the way in reducing emissions. Between 1990 and 2022 we cut emissions by 50%. This compares to 23% in France and no change in the USA up to 2021. This was done without premature closing down of domestic production in the North Sea.
Great Britain does indeed need energy security and more affordable energy for both businesses and residents, but Labour’s ill-thought-through plans and the record of Labour’s failed energy policies in Local Government suggest they won’t deliver either.
The post Robert Alden: If Labour councils are any guide, GB Energy could leave taxpayers in a great deal of debt appeared first on Conservative Home.
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Author: Robert Alden
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