Thursday 28 March 2013

Innovative subsidies

Time and time again, the UK government has reiterated one key message on nuclear energy.  It has pledged repeatedly that new stations will be allowed only “provided they receive no public subsidy”.

The reality is rather different; ministers and civil servants are beavering away in the background, finding ever more creative ways of paying subsidies in disguised form.
The most obvious way in which there will clearly be a massive subsidy to any new nuclear power stations is that the government, or rather the taxpayer, is effectively underwriting the cost of future decommissioning.  They don’t admit that of course, but it’s completely inevitable.  Unless the costs are known in advance (which they’re not) and paid for up front (which the government can’t insist on, not least because they’re unquantifiable), then no private company will ever be able to commit to pay those costs after the useful life of those stations has come to an end.
How could it?  The income stream will have ended; the profits will all have been taken.  The capitalist model of enterprise simply isn’t suitable for a scenario where there are unquantifiable but large costs to be paid for decades after the end of profitable operation.  So, whatever they say now, if new nuclear power plants are built, “we” will be paying the costs.
The second most obvious way of providing disguised subsidies is through price-fixing.  New nuclear power stations will be built only if the government is prepared to guarantee the price which will be paid for all the electricity produced.  For a Conservative government in particular, this is a massive intervention in the operation of a free market – and again, it is we who will be paying the subsidy.
Vince Cable has this week come up with another way of disguising a subsidy as something else.  He launched a new “skills strategy” to provide the specialist training which the companies involved would otherwise have to pay for themselves.
Best of all, in this particular initiative, is that it’s described as part of a strategy to “support successful sectors”.  If they are that “successful”, why do they need government support?
And that is part of a much wider problem, which appears in one form or another on an almost daily basis.  Leaders in business sector after business sector – the same people who are often arguing that the government should cut welfare spending faster so as to reduce taxes on them – are calling for government to spend money in ways which will benefit their businesses.
Whether it’s training, infrastructure, or whatever, these “successful” businesses are all seeking to externalise as much as they can of their own costs, whilst maximising their own profits and rewards.
It might be argued that “that’s what capitalists do” – and that would be an entirely fair point.  It would also explain why pro-capitalist politicians, in all parties, are so quick to support such calls for spending to benefit business.  But why do the rest of us fall for it?
Capitalism is supposed to be about risk and reward; but increasingly the capitalists take the rewards without taking any risks – they externalise those to us.  That is effectively what the builders of new nuclear power stations will be doing – taking maximum rewards whilst sharing their risks amongst the rest of us.  And it happens because they, either directly or through their political friends, have the power - and we don’t.

1 comment:

G Horton-Jones said...

John
There are surely some indicators as to the likely long term costs involved in decommissioning nuclear power stations Trawsfyndd and those who have prematurely shut down due to accidents spring to mind.
The tragedy in the English two Party scenario A will replace B A will then be replaced by A ad finitum and therefore no one really cares for the long term. --ie anything over 4 years.
It is not our problem