Rishi Sunak and the Conservative Party.

[Broucek]

I'd say the current Tories are pretty high-tax, high-spend though. It is slightly disguised because income tax isn't especially high, but they make up for that with all the other taxes. One may disagree with how they raise money and how they spend the money - I do! - but government keeps getting bigger and bigger (and more and more intrusive) whoever is in power.

With industrial levels of fiscal drag.....

 

[isaashthomas]

Personally, I think it's bad taste to compare anything to the Holocaust. However, I do not think this is antisemitic. I don't agree that the vaccine programme was a crime against humanity, and if it was it's certainly not the worse since the Holocaust, but these are legitimate opinions which Bridgen is entitled to express.

There's also the point that saying anything is the biggest crime against humanity since the Holocaust is actually acknowledging that the Holocaust was the most horrific crime against humanity. Had he said it was worse then the Holocaust then I could understand claims of antisemitism.

So I hope Bridgen wins too, even though I cannot stand the man (I cannot stand Hancock either, mind).

I agree with you, the point is that this however goes well as a comparison and a negative memory in history, this is what we cannot forget.

 

[MikeWM]

With industrial levels of fiscal drag.....

...combined with (almost) everyone getting significantly below-inflation pay rises.

These figures published today of inflation in the last year are truly horrific. Some lowlights, with the basics of 'heating and eating' being the worst affected:

- Eggs 32%
- Pasta 24.1%
- Bread 18.9%
- Fish 16.7%
- Gas 129.4%
- Electricity 66.7%

 

[nw1]

...combined with (almost) everyone getting significantly below-inflation pay rises.

These figures published today of inflation in the last year are truly horrific. Some lowlights, with the basics of 'heating and eating' being the worst affected:

- Eggs 32%
- Pasta 24.1%
- Bread 18.9%
- Fish 16.7%
- Gas 129.4%
- Electricity 66.7%

Capitalism only works when it delivers value and choice to the consumer, which clearly here it is not. It does not work when monopolies or near-monopolies exploit a captive market. The root cause of this is, I am sure, multinational oil/gas companies exploiting the situation in Ukraine to further their own ends. And price rises in sectors other than energy are, I am sure, caused by energy price hikes.

It's not good for the economy as a whole, as it means that people have less money to spend on other products and services. Thus, there does in my view need to be some degree of state control of the capitalist system, otherwise you have one sector of the economy screwing all the others, such as is happening now where energy appears to be screwing everything else.

 

[MikeWM]

Capitalism only works when it delivers value and choice to the consumer, which clearly here it is not. It does not work when monopolies or near-monopolies exploit a captive market. The root cause of this is, I am sure, multinational oil/gas companies exploiting the situation in Ukraine to further their own ends. And price rises in sectors other than energy are, I am sure, caused by energy price hikes.

I'd argue that lockdowns and the shutting down of large parts of the economy for months on end should take the share of the blame rather more than Ukraine, and I don't think the far too hasty rush to 'net zero' is helping either, but otherwise I agree.

It's not good for the economy as a whole, as it means that people have less money to spend on other products and services. Thus, there does in my view need to be some degree of state control of the capitalist system, otherwise you have one sector of the economy screwing all the others, such as is happening now where energy appears to be screwing everything else.

For essential products, where there are huge/insurmountable barriers to entry for newcomers, yes I agree entirely, there's no 'free market' that can work well in such cases and so this is one area where the state really does need to involve itself for the good of its citizens. As far as I'm concerned that is the sort of thing governments should be actively doing, rather than some of the total nonsense they've expanded into in recent years.

 

[najaB]

I'd argue that lockdowns and the shutting down of large parts of the economy for months on end should take the share of the blame rather more than Ukraine, and I don't think the far too hasty rush to 'net zero' is helping either, but otherwise I agree.

If we were talking about 2022 then I would agree, but it's almost two years since the last lockdowns ended.

 

[MikeWM]

If we were talking about 2022 then I would agree, but it's almost two years since the last lockdowns ended.

It's 15 years since the financial crash, and we're still feeling the impact of that economic shock. And in many respects the economic shock of lockdown was worse. Many people predicted that a consquence of lockdown would be considerable inflation for a time.

For energy prices specifically, perhaps the effect is less due to lockdown. But whatever the cause initially was, prices had sky-rocketed *before* Ukraine started, as was pointed out here at the end of last year:

https://twitter.com/statsjamie/status/1594008811827773441




(Edit to add : it is possible of course that Ukraine is now being used as an excuse to *keep* prices high...

Also there are various reports for example of us buying oil from India which itself is buying it from Russia, as we can't buy from Russia directly due to our own sanctions that the Tories decided to impose after the Ukraine invasion. So in effect we still buy the oil from Russia but pay a lot more for it. Which seems the definition of insanity to me).

 

[DynamicSpirit]

Capitalism only works when it delivers value and choice to the consumer, which clearly here it is not.

Really? What makes you so sure that it isn't? The mere fact that prices are higher than you might wish, or that they have risen sharply does not itself prove that capitalism isn't working - particularly when there are very obvious good reasons why the costs of producing those products would have risen - which is clearly the case in the examples you cite. Do you have any evidence that some hypothetical non-capitalist system, faced with the same restrictions on energy supply combined with high energy demand, would have produced cheaper energy prices?

It does not work when monopolies or near-monopolies exploit a captive market.

I agree. But you haven't provided any evidence that that is what is happening here. You've merely asserted.

The root cause of this is, I am sure, multinational oil/gas companies exploiting the situation in Ukraine to further their own ends.

Riiight... So the fact that lots of cheap Russian energy that we would previously have consumed has suddenly become unavailable, and the West has suddenly had to scurry round to find replacement sources (which presumably are more expensive/harder to get coz otherwise we'd already have been using them) with all the obvious impacts on the market, is merely a figment of our imagination, I guess?

And price rises in sectors other than energy are, I am sure, caused by energy price hikes.

That I'd agree with. Probably along with rising other costs (wages, and in the case of stuff imported from Europe, Brexit related admin).

 

[najaB]

Riiight... So the fact that lots of cheap Russian energy that we would previously have consumed has suddenly become unavailable, and the West has suddenly had to scurry round to find replacement sources (which presumably are more expensive/harder to get coz otherwise we'd already have been using them) with all the obvious impacts on the market, is merely a figment of our imagination, I guess?

The two are not mutually exclusive. For example, Aramco, et al resisted pressure to increase output specifically to keep prices high.

The Organisation of Petroleum Exporting Countries and its allies (OPEC+), led by Riyadh and Moscow, failed Wednesday to respond to a call to produce more and faster, despite pressure on the Gulf states in particular.

The group argued that the "current volatility is not caused by changes in market fundamentals but by current geopolitical developments," according to a press release.

"Gulf countries are testing their ability to have a strategic autonomy, to defend their own national interests," Hasan Alhasan, a Middle East specialist at the International Institute for Strategic Studies, told AFP.

The Gulf countries, which had suffered from declines in oil prices since 2014, now seem all the more reluctant to take immediate action as they benefit from the short-term price surge.

If the barrel stays above $100, this will mean that none of the six Gulf Cooperation Council countries will face a budget deficit by 2022, wrote researcher Karen Young of the Washington-based Arab Gulf States Institute.

'Not our war': Gulf states resist pressure to raise oil output

Russia's invasion of Ukraine has sent energy prices surging, but the oil-rich Gulf monarchies have so far resisted Western pressure to raise output, prioritising their own strategic and economic interests.…

www.france24.com

True, the Gulf oil companies are arguably not the best examples of capitalism, but it demonstrates that oil producers have acted to keep prices high, despite the impact it has on 'the West'.

 

[DynamicSpirit]

The two are not mutually exclusive. For example, Aramco, et al resisted pressure to increase output specifically to keep prices high.

'Not our war': Gulf states resist pressure to raise oil output

Russia's invasion of Ukraine has sent energy prices surging, but the oil-rich Gulf monarchies have so far resisted Western pressure to raise output, prioritising their own strategic and economic interests.…

www.france24.com

True, the Gulf oil companies are arguably not the best examples of capitalism, but it demonstrates that oil producers have acted to keep prices high, despite the impact it has on 'the West'.

That's true and would be a fair point if it was actually companies keeping prices high in order to profiteer. My understanding though is that this was largely a political decision by Saudi Arabia and other gulf countries (Correct me if I'm mistaken but I believe the Saudi Government owns the majority of Aramco shares?) that may have been driven in part at maximising revenue and in part at making a political statement about their political affiliations and their annoyance that (from their point of view) the West hasn't sufficiently supported their concerns in recent years. To that extent, if there is any failure of capitalism, then it's a failure possibly caused by too much, rather than too little, state interference? Or maybe it's best seen as a case of the West losing out because of other countries choosing to defend their own political aims - which in one sense is what we (quite correctly) have done in sanctioning Russian energy.

(Of course there's also the huge political failure of regulation/tax regime highlighted by, why are we still so dependant on climate-damaging fossil fuels in the first place? But that's a whole separate story)

 

[yorksrob]

And of course, increasing interest rates in an attempt to control imported inflation, will only serve to increase inflation further as they feed into increased housing costs.

 

[duncanp]

And of course, increasing interest rates in an attempt to control imported inflation, will only serve to increase inflation further as they feed into increased housing costs.

Another thing that will feed inflation is fantasy 35% pay demands by the likes of the BMA, who seem to think that money grows on trees.

 

[Yew]

Another thing that will feed inflation is fantasy 35% pay demands by the likes of the BMA, who seem to think that money grows on trees.

That's only just keeping up with inflation. If you give people below-inflation rises for a decade, eventually they're going to stand up for themselves.

 

[duncanp]

That's only just keeping up with inflation. If you give people below-inflation rises for a decade, eventually they're going to stand up for themselves.

But if the government were to accede to the BMAs demands, then everyone else would demand similar increases, which would feed an inflationary spiral.

 

[najaB]

Another thing that will feed inflation is fantasy 35% pay demands by the likes of the BMA, who seem to think that money grows on trees.

They demand 35% in order to get 10 or 12% at the end of the day. If they asked for 10% they would end up with 3%.

 

[nw1]

Riiight... So the fact that lots of cheap Russian energy that we would previously have consumed has suddenly become unavailable, and the West has suddenly had to scurry round to find replacement sources (which presumably are more expensive/harder to get coz otherwise we'd already have been using them) with all the obvious impacts on the market, is merely a figment of our imagination, I guess?

But from my understanding the UK didn't use Russian energy to any great degree, compared to some continental countries certainly - we sourced from other places. But those other places have become more expensive and I believe they are doing so because they are exploiting the fact that there are less energy sources to choose from. Classic manipulative monopoly or near-monopoly tactics, as I said.

And we certainly didn't use Russian energy in the cold war, and we still somehow managed.

I realise this is an anathema to many, but one could argue that for the greater good, the energy companies should have enforced price caps imposed on them from some kind of international energy regulator. They might suffer, but the rest of the economy, not to mention individual people, would benefit because a) they would be less prone to poverty and bankruptcy and b) more money would be going into the rest of the economy and not being sucked up by the energy sector.

How is it right that large, powerful companies like BP and Shell are making huge profits when everyone else is struggling?

== Doublepost prevention - post automatically merged: 20 Apr 2023 ==

Another thing that will feed inflation is fantasy 35% pay demands by the likes of the BMA, who seem to think that money grows on trees.

I would actually agree 35% is a little high believe it or not (though they still need a generous pay rise, don't get me wrong) - but even still, a drop in the ocean compared to other factors.

 

[DustyBin]

But from my understanding the UK didn't use Russian energy to any great degree, compared to some continental countries certainly - we sourced from other places. But those other places have become more expensive and I believe they are doing so because they are exploiting the fact that there are less energy sources to choose from. Classic manipulative monopoly or near-monopoly tactics, as I said.

And we certainly didn't use Russian energy in the cold war, and we still somehow managed.

I realise this is an anathema to many, but one could argue that for the greater good, the energy companies should have enforced price caps imposed on them from some kind of international energy regulator. They might suffer, but the rest of the economy, not to mention individual people, would benefit because a) they would be less prone to poverty and bankruptcy and b) more money would be going into the rest of the economy and not being sucked up by the energy sector.

How is it right that large, powerful companies like BP and Shell are making huge profits when everyone else is struggling?

I’m actually with you here, certainly to an extent anyway. Whilst I’m ideologically opposed to over-regulation, there are situations where free market capitalism comes with its own problems, this being one of them. I don’t mind these companies making healthy profits, they should and indeed need to, but record profits whilst people are struggling? Something’s not right here in my opinion.

 

[jfollows]

Today or tomorrow could mean Rishi Sunak is appointing a new Justice Secretary and Deputy Prime Minister, if there's actually a need for the latter. It looks as if the investigation into Dominic Raab will come to an end, possibly be sent to Rishi Sunak today and published soon after. Three outcomes are sacking, resignation or nothing.

The odds appear to be in favour of one of the first two, it would appear. However the opinions don't seem conclusive, just that the report will not be good for Dominic Raab and that he'll probably have to go. If he doesn't, there are some civil servants who will probably resign and more of them who will ask to be reassigned away from Dominic Raab.

It's interesting that in the wake of the chaos with Boris Johnson, Liz Truss and others that this now appears to be a rather humdrum thing, just another possible government minister being sacked or resigning, nothing new here ....

EDIT Report supposedly getting to Rishi Sunak at 1130 per https://twitter.com/breeallegretti:

Aubrey Allegretti
@breeallegretti
·
16m

I'm told the Dominic Raab report is now nailed on for arriving today. Expectation in Downing Street is PM will get it around 11:30am - so when we see the findings and response depends on how long he takes to make a decision.

 

[DynamicSpirit]

But from my understanding the UK didn't use Russian energy to any great degree, compared to some continental countries certainly - we sourced from other places.

But the market isn't a purely UK market: Energy gets imported and exported across Europe, which means that to some extent wholesale prices get set at a continent-wide level (I'm willing to stand corrected, but as I understand it, I think for energy, it tends to work as a kind of auction where the wholesalers bid to buy the energy from the manufacturers). To that extent we were suffering because other European countries sourced a much greater proportion of their energy from Russia and that fed through to prices in the UK too.

But those other places have become more expensive and I believe they are doing so because they are exploiting the fact that there are less energy sources to choose from. Classic manipulative monopoly or near-monopoly tactics, as I said.

If it's a monopoly. Is it? My understanding is that there are quite a few companies producing energy.

And we certainly didn't use Russian energy in the cold war, and we still somehow managed.

That was a very long time ago with different infrastructure and different energy needs that had built up. In particular, we used a lot less energy and we had an awful lot of coal mines to produce it (very dirtily).

I realise this is an anathema to many, but one could argue that for the greater good, the energy companies should have enforced price caps imposed on them from some kind of international energy regulator. They might suffer, but the rest of the economy, not to mention individual people, would benefit because a) they would be less prone to poverty and bankruptcy and b) more money would be going into the rest of the economy and not being sucked up by the energy sector.

It's not about it being anathema to cap prices: It's not some kind of religious objection: It's about what would happen if you did cap prices (of energy or of anything else). You have to remember that, in a free market, the reason the price of anything reaches the level it does is generally because that's the price that matches supply and demand. The cheaper something is, the more people usually want to buy it and conversely, the less willing manufacturers are to produce it. Set the price of anything too low and you end up with a shortage because people are trying to buy more than there is available. Or if companies set the price too high, they find themselves stuck with stuff that they can't sell - until they reduce the price [*]. So if you artificially cap the price of energy below the market price - the inevitable result will be, people trying to buy energy that simply isn't there: So you then have a choice between (a) random power cuts and petrol stations with no petrol etc., or (b) trying to have the Government using the law and regulations to ration power supplies in some way, with all the associated bureaucracy. I leave you to judge whether you think paying more for your energy is better or worse than suddenly finding that you have no energy because there's been a power cut, or because under the Government's rationing scheme, it's been decided that you've used up your quota.

[*] This is in a genuinely competitive market. It doesn't work well if there is a monopoly.

 

[ainsworth74]

And we certainly didn't use Russian energy in the cold war, and we still somehow managed.

We, or at least Western Europe, certainly did. The Soviet Union exported natural gas and oil starting in the mid-70s. Whilst it wasn't (on a Europe wide scale) a huge proportion of the energy sources for Europe it wasn't nothing (and I believe West Germany was particularly reliant even then on Soviet gas).

 

[nw1]

We, or at least Western Europe, certainly did. The Soviet Union exported natural gas and oil starting in the mid-70s. Whilst it wasn't (on a Europe wide scale) a huge proportion of the energy sources for Europe it wasn't nothing (and I believe West Germany was particularly reliant even then on Soviet gas).

Ah ok - sorry, I would have assumed that due to the Soviet Union being seen as the "enemy", if you like, during the Cold War, the last thing the West would want to do is do business with it.

 

[birchesgreen]

Other way around too, at times the Soviet Union (depending on how well their harvest went) had to import a lot of grain from elsewhere, the major supplier being... the United States of America.

 

[najaB]

If it's a monopoly. Is it? My understanding is that there are quite a few companies producing energy.

There are more characteristics of a cartel than a monopoly...

 

[DynamicSpirit]

We, or at least Western Europe, certainly did. The Soviet Union exported natural gas and oil starting in the mid-70s. Whilst it wasn't (on a Europe wide scale) a huge proportion of the energy sources for Europe it wasn't nothing (and I believe West Germany was particularly reliant even then on Soviet gas).

Ah ok - sorry, I would have assumed that due to the Soviet Union being seen as the "enemy", if you like, during the Cold War, the last thing the West would want to do is do business with it.

Ah, my bad too on that one. I simply assumed in my reply to @nw1 that we weren't importing from the USSR. Thanks for the correction @ainsworth74

(Although to be pedantic: As I recall, 1970s was when we were in détente; I would interpret the 'cold war' @nw1 referenced as the 1950s/early 60s, when US/USSR hostilities were at their height. Were we importing Soviet energy at that time?)

 

[brad465]

I agree. But you haven't provided any evidence that that is what is happening here. You've merely asserted.

But from my understanding the UK didn't use Russian energy to any great degree, compared to some continental countries certainly - we sourced from other places. But those other places have become more expensive and I believe they are doing so because they are exploiting the fact that there are less energy sources to choose from. Classic manipulative monopoly or near-monopoly tactics, as I said.

A monopoly I can think of in this country are our water companies, which are a geographical monopoly, so you have no choice but to go with whoever the company is in your local area. If we could only nationalise one utility industry in this country, I'd be going for this one, we've seen evidence of how ineffective private water companies are through billions of litres lost in leaks that are not profitable to fix, and in all the untreated sewage being dumped in rivers and bathing waters.

As @najaB pointed out above, there are plenty of sectors that are displaying cartel characteristics more than monopoly, but that doesn't make the situation any better. One reason that really needs to be sold for promoting renewable energy is not being beholden to cartels like OPEC; some will say we should find more domestic oil and gas, but this will still be sold on the global market and we won't be able to extract enough to influence prices anywhere near as much as OPEC can.

 

[ainsworth74]

(Although to be pedantic: As I recall, 1970s was when we were in détente; I would interpret the 'cold war' @nw1 referenced as the 1950s/early 60s, when US/USSR hostilities were at their height. Were we importing Soviet energy at that time?)

They 80s got pretty bumpy too! But yes to my understanding during the 50s/60s we were not important energy from the Soviet Union. A mixture of their petrochemical industry still developing, the Soviet economy still being comparatively strong (compared to later), the price of energy being low and it being plentiful along with, shall we say, strained relations. With the oil shock of the 70s, the stagnation of the Soviet economy and them having mature fields ready for exploitation and Détente it became possible for deals to be done with Soviet and then Russian gas flowing in increasing volumes all the way until the war in Ukraine.

 

[edwin_m]

But those other places have become more expensive and I believe they are doing so because they are exploiting the fact that there are less energy sources to choose from. Classic manipulative monopoly or near-monopoly tactics, as I said.

Not necessarily a monopoly or a cartel, merely supply and demand in the market. Oil and gas have become more scarce because a big supplier is under sanctions, so those who are able to pay more to secure supplies will do so and the suppliers will sell to whoever pays the most. Capping sale prices generally won't work unless it's done across most of the world, otherwise the suppliers would just sell to countries where the cap wasn't applied. However, the cap on Russian oil price does actually appear to be effective, since it works through shipping insurance which is controlled by a few Western countries, and this serves to reduce the scarcity and ensure that the Russians aren't making super-profits. Aside from that the correct response is a windfall tax, using the proceeds to help those who most need it, preferably in a way that keeps the retail price rather high so people are encouraged to use less. Apart from supporting the price cap, the UK government isn't doing this to any significant extent.

The high gas and oil prices also impact the electricity market. Supply and demand operate here too, as electricity from other sources is more in demand when gas is scarce. The rather artificial electricity market also has some providers who generate power by other means holding contracts that pay according to the price of gas, which strikes me as another area for a windfall tax.

 

[JamesT]

The high gas and oil prices also impact the electricity market. Supply and demand operate here too, as electricity from other sources is more in demand when gas is scarce. The rather artificial electricity market also has some providers who generate power by other means holding contracts that pay according to the price of gas, which strikes me as another area for a windfall tax.

Jeremy Hunt is already there - https://www.theguardian.com/busines...nds-energy-windfall-tax-low-carbon-generators

From 1 January, a tax will also apply to “low carbon electricity generators”, including wind, solar and nuclear, levied at 45%. This is higher than the 40% rate trailed before the budget.

 

[Garmoran]

A monopoly I can think of in this country are our water companies, which are a geographical monopoly, so you have no choice but to go with whoever the company is in your local area. If we could only nationalise one utility industry in this country, I'd be going for this one, we've seen evidence of how ineffective private water companies are through billions of litres lost in leaks that are not profitable to fix, and in all the untreated sewage being dumped in rivers and bathing waters.

I'm surprised by this statement. Business users even in the West Highlands have a choice of at least 2 water suppliers, although obviously the water all comes from the same place in the same way as electricity and telephone lines are the same whichever supplier you use.
I'm not sure how you would provide different water distribution systems

 

[edwin_m]

Jeremy Hunt is already there - https://www.theguardian.com/busines...nds-energy-windfall-tax-low-carbon-generators

It could probably be called a "windfall tax in name only". The article notes that the windfall tax rate on renewables is higher than on fossil fuel companies. There are also exemptions for new fossil fuel projects which are very unlikely to come onstream in time to make a difference to the current situation, and when they do so will make decarbonisation more difficult. The energy subsidy for UK consumers is mainly funded by government borrowing to be repaid by future taxpayers.