Labour’s plans to nationalise energy network

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In May 2019, on a visit to a social housing estate in Greater Manchester. Jeremy Corbyn unveiled plans for Labour’s “Green Industrial Revolution”.

The setting was appropriate as the plans not only address climate change by cutting carbon emissions but also standards of living for social housing and low income households by cutting energy bills.

The National Grid

At the heart of the plans, which will be put into action if/when labour forms a UK Government, is renationalisation of the National Grid.

A labour government would create a new National Energy Agency to run the National Grid and would also be tasked with reaching two major targets

  • reduce the UK’s carbon emissions to zero by 2050
  • 60 per cent of the UK’s energy to be from renewables by 2030

Assisted by 14 new regional energy agencies, the national agency would also have the brief to improve the distribution of energy produced by solar, tidal, and wind methods in remote areas of the country, allowing access to these sources by more of the UK. This would be helped by the agency overseeing the investment in energy infrastructure.

Another measure under the umbrella of the Green Industrial Revolution is the installation of solar panels for 1.75 million homes (social housing and low income homes), with the aim of providing the working class with cheaper energy bills. Some would be funded by the government and for others there will be a programme of interest-free government loans and grants.

Justifying this, Labour stated that 25 per cent of income from energy bills goes to the power network companies but shareholders get the greatest benefits: more than £13 billion has been paid out as dividends in the past five years. Rebecca Long-Bailey, the shadow business secretary, stated that “under the proposals, heat and electricity would be treated as a basic human right”.

It was claimed that 16,900 jobs would be created, and carbon emissions would by reduced by 7.1 million tons a year. Bills would see an average reduction of £117 a year.

The Response of the Conservative Party

The Conservative Party chose Vice-chairman for policy and MP for Croydon South, Chris Philp to respond to Labour’s idea of renationalising the National Grid. He said the “ideological plan for the state to seize these companies would cost an eye-watering £100bn and saddle taxpayers with their debts”. He added that Labour had no credible plan to pay for it and inevitably the financial burden would fall on borrowing and tax hikes. It would also change the customer proposition with the responsibility of keeping the lights on transferring to Westminster and its politicians, leaving customers with nowhere else to turn.

What the Business World Has to Say

A spokesman for the National Grid was not positive in their response to Labour’s plans, claiming renationalisation would destabilise what is “one of the most reliable networks in the world”. The national grid had just celebrated breaking the record for the longest period of time the UK has gone without coal generated electricity. Stating that the National Grid is “at the heart of the decarbonisation agenda”, renationalisation would be of huge cost, and complexity, and a distraction from the urgency to meet the challenges of climate change. “These proposals for state-ownership of the energy networks would only serve to delay the huge amount of progress and investment that is already helping to make this country a leader in the move to green energy”.

The message from the Confederation of British Industry (CBI), delivered by the chief UK policy director, Matthew Fell, is that Labour are “revisiting mistakes of the past”. Renationalisation would cost the country in terms of causing concern for investors, discouraging innovation, and threatening energy network improvements; effectively “a triple whammy neither citizens nor the country can afford.”

A Legal point of View

Leading Law firm Clifford Chance issued a response via the BBC stating that the outlined plans could be in contravention of international law because Labour has implied that the renationalisation would not necessarily be at stock market value. To date, all UK privatisations had been at market value and it would not be down to Labour to set what it decided as a fair price. Not allowing market value contravenes international law and would create a UK precedent. It is also, generally, an international convention for markets to set prices for assets being privatised.

Clearly there is scope for passionate debate about this issue, a debate which will become wider and hotter when the plans are included in a Labour election manifesto.

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