Lesley Riddoch - State control can be only way to solve growing energy crisis

Published on Sunday 3 August 2008 21:19

GAS prices are set to rise by 35 per cent. The housing market is static. "Safe" jobs in banks, estate agents and legal firms are being lost.

Long-standing local firms like the Curtis Mill in Guardbridge have closed through lack of credit. Multinationals like Starbucks are running at a loss. Civil service unions are striking for higher pay. Fat-cat bonuses are making headlines and calls for windfall taxes are commonplace.

And what do we hear from the party with its hand on the tiller?

Scottish Labour leadership candidates talk of renewal and reconnecting. David Miliband talks of the need for new ideas. Gordon Brown says nothing – fair enough, he's on holiday – but if stand-in Harriet Harman's said anything, I can't remember it.

All around, there is the sound of fiddling while the UK economy burns – and not all the cacophony is emanating from No 10.

The Scottish Government has encouraged Transport Scotland to paint Saltires on trains – fine. But as BA announces the cancellation of one in ten Scottish flights, we need more than new livery. We need to electrify railways and subsidise the price of rail travel. Fast.

Ditto the A9. Since two smart-thinking surgeons have proved that dualling saves lives, we have a template for making that grim calculation about the A9: 600 million spent now would pay for itself in about 30 years. So why don't we just do it – and dual more of the northern train line to satisfy green concerns? Money is tight – but that should mean investment decisions are bolder.

Admittedly, the SNP government controls only a fifth of Scottish spending. It's a minority administration and couldn't stop A9 cash being spent on unwanted Edinburgh trams instead. But whether spending is at council, quango, Holyrood or Westminster level, there's only one measurement that should count from now on. Is it progressive? Will it cosset or wean us from backward-facing habits? Will public spending create feelgood projects or transformational change? Is public cash being spent to mollify or lead us? When times are hard, government can't argue it's time to cancel state spending on big infrastructure projects, because when it comes to really essential projects they never actually started.

Take gas. We used to flare it off oilrigs rather than collect it. We don't store it either, so excess gas goes directly abroad, which means the UK produces more than enough gas to supply home demand, but sells it to Europe, then buys it back at twice the price.

With only one oil refinery and storage space for only 5 per cent of our gas, it's no wonder we have shortages and price hikes. Thanks to a succession of non-interventionist governments, energy policy has been devised by shareholders to suit themselves – not the public.

Centrica can put some of this right by building the UK's first offshore gas storage facility for over 25 years – converting the Bains gasfield in the east Irish Sea into a seasonal storage facility. Is that project definitely going ahead? Centrica cannot confirm that it will. Can government help make it happen? It must. This project cannot be a repeat of the Peterhead Carbon Capture plant. That would have generated "carbon-free" electricity from hydrogen and captured carbon dioxide in empty underground oil wells. But BP pulled out – tired of waiting for UK government support.

Last week the same thing happened to England's nuclear power ambitions – Gordon Brown's government was fiddling while the proposed takeover of British Energy fizzled out. The 12 billion sale of the East Kilbride-based nuclear company collapsed after two investors, Invesco and Prudential, thought the offer from the French company EDF was too low at a time of soaring global oil and gas prices. In short – an outbreak of corporate greed.

The sale would have raised about 4 billion for the Exchequer which owns 35 per cent of British Energy. And whether you like nuclear energy or not – and I don't – that's enough to slash fuel poverty this winter … and next.

But it won't happen. When Gordon Brown was trumpeting his commitment to a new generation of nuclear power stations last year, his government was selling off its majority shareholding in British Energy. That's not hands-off government. That's brains-off government. The future energy supply of England is now in the hands of shareholders looking to make a fast buck out of Britain's energy chaos.

Mrs Thatcher couldn't have planned it more perfectly. And indeed, since her cack-handed privatisation of the electricity market no government has had the gumption to intervene as shareholders have become cash-rich, consumers have become energy poor and strategic decisions about national energy supply have been left to company boards.

Arguably shareholder aversion to upgrades has left the Scottish Government with an unpopular decision over the Beauly-Denny pylon proposal. Companies like SSE failed to renew pylons over the years, leaving a very visible jump in pylon size until the last minute. Postponing investment made sense for shareholders – it hasn't made sense for Scotland.

Likewise tidal and marine energy. The SNP's Saltire prize is great for publicity and pump-priming, but the bulk of marine devices still need support for live testing at sea. The prize is at best window-dressing when pioneers need long-term, low-key support. A bit like the Saltires on trains.

Low-cost rebranding is fine. But the time for cosmetic surgery is past. We need governments who are equipped to make investment decisions – instead of leaving them to shareholders and boards. And we need a renewal of public ownership, public investment and state control. Because sometimes, nothing else works.