May 18, 2023 - 10:00am

The Labour Party’s biggest financial backer, the trade union Unite, is calling for the nationalisation of the entire British energy sector. Politically, this move is interesting, and seems to raise the prospect that Keir Starmer’s party may end up as terrifying to the business community as Jeremy Corbyn’s was. But on a purely economic basis, calls to nationalise look odd.

Unite’s General Secretary, Sharon Graham, says that by nationalising the sector Starmer can solve the energy crisis. “We are paying ridiculous amounts for our energy that many other countries aren’t because they own their own energy production,” said Graham. “If we owned our own energy, £90bn is what it would cost but from that point it sits on the books as an asset […] it generates return. And then we could regulate what households and businesses pay for their energy.”

Graham seems either confused or misinformed. The Government does not need to nationalise the energy sector to regulate — or, more accurately, subsidise — what the public pays. Indeed, through the Energy Price Guarantee (EPG) the Government is already doing this, at enormous public sum. In its first six months alone, the EPG is estimated to have cost around £25bn. That means that two years of the current guarantees would cost the Government more than the entire cost of nationalising the grid as estimated by Unite.

It appears that Unite has bought into its own PR. The union argues that the energy price increases we are seeing are due to so-called “greedflation” — that is, because energy companies are hiking profits and taking advantage of the public. But this is not true. The energy crisis is due to a simple lack of energy. This in turn is due to the impact of the war in Ukraine and the ensuing sanctions, which have almost eliminated cheap Russian piped gas into Europe.

Apart from turning back on the pipelines to Russia, the only way to solve this problem is to build alternative energy sources domestically. In fairness, Unite seems to partially recognise this and advocates building nuclear power plants. This is a welcome intervention, but these power plants take almost a decade to come online.

The quickest domestic power sources that can be built are coal-fuelled power plants. These take around three or four years to build, which is still a long time, considering how pressing the energy crisis is. But Unite cannot advocate for these because the Left fell out of love with the mining sector under Tony Blair, and today any notion that Britain should produce and consume coal is looked upon with horror.

Perhaps Unite could argue that nationalisation would ensure more rapid building of power plants than leaving it to the private sector. But the core issues are regulation and a matter of sheer will. Is the Government comfortable with building certain power source capacities out? If they are, there are plenty of ways to get this done, with or without nationalisation. If they are not, then the energy crisis may never be resolved.

One might be forgiven for thinking that Unite is reaching into the past and pushing policies of nationalisation, because its officials do not want to take a good look in the mirror and ask themselves who they are. Are they part of the same trade union movement that allied with coal miners against Margaret Thatcher’s attempts to close the pits in the 1980s? Or are they at the forefront of a new movement, staffed by university graduates whose worldview is more aligned with the World Economic Forum than with any truly working-class interests? Unfortunately, it appears to be the latter.

Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics