Category Archives: Politics

Britain, Consumer Affairs, Economic, Energy, Government, Politics, Society

Addressing the massive public concern over rising energy bills…

ENERGY SUPPLY FIRMS

The Government has made known its intention to make it a lot easier for energy consumers to switch their supplier. Ed Davey, the Energy and climate change secretary, wants consumers to be able to do it within a day instead of the present arrangements which can take up to five weeks. Mr Davey’s suggestion certainly sounds like a positive move and one which will be embraced by all energy customers seeking better deals elsewhere in the market.

But is the real issue not more to do with consumer inertia and one that is caused by the belief that banal paperwork is tedious and that some cost may be involved, rather than the time taken to complete such a move? If so, then the additional competition which the Government is craving for – which should drive down prices – may not occur at all.

Of more significance, though, is Mr Davey’s plan to make the probing of the accounts of the ‘Big Six’ energy supply firms a lot easier. They have been accused and arraigned of utilising networks of subsidiary companies to purchase and sell fuel and services – effectively from and to themselves. This has allowed them to inflate prices and to boost profits while claiming that they are faced with soaring costs.

Whilst more transparent accounting practices could put a stop to this, a cautionary note would also be required to be issued. Based on recent experience of other big corporates’ activities, however clever state legislators and the tax authorities think they are, big company lawyers and accountants will always be one step ahead of them. That is pretty much a given.

But in a politically astute move, Mr Davey is also considering increasing the size and weight of the political baton he can wave at energy companies. This could lead to their executives being liable to face criminal prosecution if the evidence proves that they have been engaged in unfair and illegal price-fixing, as well as bill-inflating practices.

Most of the action that can be taken against companies to punish such activities is currently undertaken by regulators. This is done for the very good reason that regulators have a sophisticated understanding of the very complex methods that companies use. Because of that, the financial penalties and fines that OFGEM and other public regulators impose are rarely challenged.

Some commentators may argue that putting that material in front of a lay jury and expecting them to understand it, and following it through a trial which may last for several months, might be a sanction too far. Complex fraud trials are few and far between because of this very problem. However, if executives know that some underhand and deceitful practice might lead to such a trial with all the public ramifications and consequences that could follow – including imprisonment – it could also be a powerful deterrent.

In a game of fast moving politics, politicians are attempting to outbid each other in seeking to address the energy crisis problem. But action which brings results in the form of lower bills for consumers as opposed to instant popularity and votes should be the guiding principle.

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Britain, Business, Energy, Government, Politics, Society

Energy firms and the responsibilities they have…

UK ENERGY FIRMS

The decision by Britain’s biggest energy firms to send junior executives to face a grilling by MPs at this week’s select committee inquiry into soaring utility bills beggars belief.

The distinct absence of energy bosses, who are paid mega-buck salaries, goes to the heart of important issues of power, responsibility and accountability in this country. The nonappearance of chief executives also suggests that energy firms have learned little from recent history about the relationship between large consumer businesses and the customers they profess to serve.

It is not inconceivable to think that the absent bosses had in mind the cross-examinations endured by bank chiefs (including Fred Goodwin of RBS) by MPs in the wake of the government bailout of two of Britain’s major banks. Mr Goodwin – formerly Sir Fred, who has since been stripped of his knighthood – and his colleagues had to make humbling apologies for their actions as MPs held them to account.

If energy bosses had hoped to body-swerve a similar scenario as they are being held to account for inflation-busting price hikes, then they have fundamentally misunderstood their privileged position in British society, and their responsibilities in relation to regulations set out by Parliament.

Energy firms cannot take the view that their business is a private matter between them, their shareholders and their consumers. If that ever was the case – and the apparent powerlessness of the OFGEM regulator has often made it seem so – it is certainly not the case now.

Energy bills and the way they are being calculated now stand at the nexus between industry, politics and austerity. The ‘cost of living’ factor is a key voter concern and has become a major political issue in the run-up to the 2015 General Election. The main topic of political discourse was thrown open ever since Ed Miliband threw down the gauntlet at the Labour party conference, promising a price freeze and cutting electricity and gas bills if he made it into Downing Street. For the Conservatives, former prime minister Sir John Major floated the notion of a windfall tax on the energy firms, should a particularly harsh winter produce bumper profits. In Scotland, the Scottish Nationalist Party produced its own riposte, with a pledge that energy bills would be reduced by 5 per cent in an independent Scotland. The political battle over energy is heating up.

With the cost of living set to continue to be the most pressing political concern, Britain’s energy bosses need to accept they can run, but they cannot hide. They need to engage with this process – by listening, explaining and being open to market reform – or they will end up on the receiving end of both political and public indignation.

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China, Economic, Government, Politics, United States

The shifting tide of global power…

CHINA VERSUS AMERICA

A week of global economic peril, concluded late last week with a sigh of relief that reverberated around the world. America’s Republican Party zealots finally backed down following President Obama’s steadfast refusal to compromise on his signature healthcare bill. Life in Washington has returned to what passes for normal, but for the risk and uncertainty of a U.S. default deferred until January.

Late last week, too, came the news that China’s economy – the world’s most important locomotive – has recovered from two lacklustre quarters to report annual growth figures of 7.8 per cent. The good sense of the UK Chancellor, George Osborne, to engage as keenly as possible with China should be self-explanatory.

Yet, these two different events portray in the simplest terms the widening gulf and relative performance of the world’s two most powerful states. That in turn is reflecting the rather expeditious way in which global power is shifting. The Obama administration made a pivot to Asia a central tenet of its term in office, a policy that was made in response both to the economic opportunities on that side of the world and the brisk growth in China’s economic muscle. China’s geopolitical ambitions are a direct threat and challenge to the United States.

Mr Obama’s tactical approach was a sound one. The fact that Washington’s bitter political stalemate has led the president to cancel two planned Asian summits this month speaks loudly for the limits on the actual power of the man – often described, erringly, as the most powerful in the world.

China, meanwhile, continues to surge ahead, its peculiar and atypical political architecture proving to be more than adequate in hauling the rest of the world out of recession.

The economic data released from Beijing has received a muted greeting from many economists: the wild and extraordinary years in which China’s economy grew at double figures are undoubtedly over, and China’s new leadership certainly does not want them back. The Chinese challenge is to keep the economy growing fast enough to maintain a strong employment market and to avoid any prospect of incomes stagnating. Protecting domestic consumption on which future growth will inevitably depend is an important factor. Dramatic growth figures, however, will make it much harder for the Chinese government to push through their plans to curb inefficient and highly polluting industries. They need just enough growth to allow the economy to become leaner and more contemporary, but not much more to allow the unreformed parts to inflate more than they already have.

In achieving this, China has the advantage, and one that is shared by all authoritarian regimes, that all the political controls and levers are in their own hands – at least notionally. And it has to be said they are managing them with impressive competence: Xi Jinping’s self-congratulatory tune that China’s economy is basically doing very well, and that the slowdown was the result of its own adjustment initiative, is largely correct.

China is still growing, and the geopolitical power is increasingly pivoting to the East. The U.S. has tied itself in knots which it will struggle to untangle if a clear budget blueprint is not now delivered.

The implications may be stark enough, but this does not necessarily mean that we should resign ourselves to a new kind of dominion in our dealings with the Far East. For centuries, foreigners who have lived in awe of China’s size and revered age performed a pandering act. We should be careful in repudiating the idea that anyone should not be nervous about doing business with say the Chinese firm Huawei, a company that is frequently accused of industrial espionage, or by embracing Chinese management of our nuclear power stations, and saying nothing of a controversial nature. Dictatorial regimes have brutal histories, and in the case of China persecuting religious minorities and suppressing Tibetan autonomy are well documented.

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