THE International Monetary Fund has published an analysis showing that households in the UK will be the worst hit by the energy crisis in all of western Europe, facing price rises far more onerous than those which consumers in other countries will have to deal with. 

This is despite the fact that even with declining North Sea production, the UK remains a major producer of oil and gas and unlike other European economies is not dependent on gas imports from Russia. 

The reasons for this abysmal state of affairs can all be traced back to the British government’s energy policy, which is entirely reserved to Westminster. Firstly, it is because the UK is far more dependent on gas-fired electricity production than other European countries. Gas-fueled generation represents 40% of UK electricity production compared to 15% in Germany and 6% in Denmark.

Further, the UK is uniquely vulnerable to fluctuations in international gas prices because the Conservatives refused to subsidise the maintenance and improvement of gas storage facilities and then allowed the energy companies to close their facilities because when gas prices were low it was more profitable for the companies to move to an “on-demand” model rather than invest in gas storage facilities. It was a typically British government decision which prioritised short-term corporate profit over the greater good of the public. 

While the wholesale cost of gas was cheap, successive British governments preferred to encourage electricity generation from gas rather than investing in capital-intensive renewable production. The Conservatives have effectively banned on-shore wind farms in England and even now Truss talks about increasing fossil fuel production from the North Sea and fracking on shore.

The National: The Tory party is prioritising profits over peopleThe Tory party is prioritising profits over people

And as if this was not bad enough, the way in which successive Conservative governments have chosen to regulate the energy sector, if “regulate” is the right word here, means that regulation is designed to protect the profits of the energy companies, not the interests of consumers. The wholesale energy price of electricity is set so that the most expensive producer can make a profit from the sales they make into the wholesale energy market. That is currently electricity generated from gas-fueled generating plants.  The goal of the UK's energy policy is to ensure that the privatised companies generating electricity from gas can still make a profit. The cost burden is passed on to the consumer.

Generating electricity from wind is many times cheaper and cleaner than generating it from gas.  Scotland is virtually self-sufficient in electricity generated from wind, which is of course unaffected by the rise in wholesale gas prices, but Scottish consumers are facing crippling rises in their electricity bills because of the British Government's decision to tie electricity prices to the cost of gas-fueled generation.  This means that Scotland is pooling and sharing the cost burdens of Conservative governments having screwed up reserved energy policies over many decades.

Compounding the crisis even further for consumers in the UK, the difference between the cost burden imposed by the price rises on poor and richer households is also far more unequal in the UK when compared with other countries. According to Oya Celasun of the IMF, the poorest 10% of UK households are expected to spend 17.8% of their budget on energy in 2022, whereas for the richest 10% of households the figure is 6.1%. This is a difference of 11.7% and is by some considerable margin the greatest disparity among the 25 European countries assessed in the analysis. In France, the difference is 3.9 percentage points and in the Netherlands, just 2.5%. 

Yet again we see that in the UK it is the poor and vulnerable who are expected to foot the bill for Conservative mismanagement of energy policy. Liz Truss, the likely winner of the Tory I'm more Thatcherite than you are contest, promises to exacerbate an already dire situation by introducing tax cuts as the supposed solution to the crisis. This will of course only put more money in the pockets of the better off.

The current energy crisis is above all a Conservative failure and an example of how Westminster damages Scottish interests and costs Scottish households money. But the Scottish Conservatives have refused to sign up to a cross-party demand from Holyrood calling on the British Government to freeze energy prices given that this crisis is now a national emergency. The Scottish Tories are very quick to demand that the Scottish Government “do something” about devolved matters but when it comes to demanding that British Government ministers “do something” about an issue reserved to Westminster and a Westminster Conservative-created catastrophe, the Scottish Tories are nowhere to be found. 

This piece is an extract from today’s REAL Scottish Politics newsletter, which is emailed out at 7pm every weekday with a round-up of the day's top stories and exclusive analysis from the Wee Ginger Dug.

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