Twenty-two years in and it’s already obvious that this century is demanding challenges and responses for which the British Tory mindset, with one or two honourable exceptions, is wholly unprepared. This century does not require a small state – it requires an agile state. More years of denial and the UK will be in very serious economic and social trouble.
Last week came a vignette of small-state stupidity, ceding a major area of 21st-century economic activity to France and undermining our national security – with close observers believing that no minister even knew the magnitude of their crassness. I speak of the merger, on French terms, of the formerly British-controlled space company OneWeb with France’s Eutelsat, turbo-boosting the EU space effort. These Brexiters are remarkably incompetent at doing Brexit. But then incompetence comes with the territory.
OneWeb was Britain’s opportunistic way of recovering the ground we lost in space because of Brexit and the consequent forced exit from the EU’s Galileo and Copernicus programmes. Rescued from insolvency by a daring £500m bid by the UK government two years ago, OneWeb owns valuable allocated orbit “shells” and spectrum rights, reckoned to represent an astounding 15% of all space available for service delivery to Earth. This spatial real estate is the basis for a unique constellation of satellites and for the next phase of commercial space development and sophisticated communications – worth in the decades ahead tens of billions. Last week, Tory ministers let it slip through our fingers.
The Ukraine war had forced OneWeb to reschedule its satellite launch programme, at some expense. Every shareholder agreed except the British: tax cuts were more important, the state must be shrunk and the market must rule. Eutelsat saw the opening, won the OneWeb board’s approval and offered the deal to buy the risk-averse British out.
But beneath the face-saving baubles about retaining a board seat and golden share, crucially Britain will no longer have control over the future space systems developed by OneWeb or on how any of its spectrum is used. Johnson may be a liar, a constitutional vandal and corrupt, but he did have the chutzpah to launch the deal (driven by Dominic Cummings). Britain’s avowed aim is to be a globally competitive space power. Forget it. Be sure prime minister Truss will not dare to attempt any OneWebs.
But it is exactly this agile state mindset that is needed across the gamut of policy – not guff about tax cuts, aspiration, the magic of markets, attacking wokeness and bringing back grammar schools.
Our broken energy market is a case in point. British consumers face among the highest energy bills in Europe. It should be no surprise: the approach embodied by the OneWeb deal has been applied to the electricity market. The electricity tariff is not the average price of electricity produced by varying power generators, as it was when directed by the “big state” Central Electricity Generating Board, ensuring no violent spikes in prices. Amazingly, our bills are pitched at whatever price is needed to bring the most expensive producer into the grid to complete the necessary base load – not reflecting the contribution from low-cost renewables and nuclear. Consumer tariffs are thus the highest they could possibly be, reflecting the rising spot market price of gas.
Nor does the market madness stop there. Unlike a car or a TV or a new dress, electricity doesn’t vary with the producer: it is invisible. There is nothing to differentiate electricity; it is the least apt material with which to constitute a market. But in the Tory small-state mindset, markets are always best, so the doctrine is that varying producers – wind farms, nuclear energy, gas-fired power stations – form a market selling electricity to one another within a short time frame. Long-term contracts? Averaging out the costs across all generators, rather than being keyed into the highest cost generator? That implies too much big state.
The Ukraine war and rocketing oil and gas prices have blown the whole conception sky-high. Thirty suppliers have gone bust. Bills were always going to rise, but a more rational electricity production and pricing system, along with building in incentives to construct low-cost renewable capacity fast, could have drawn some of the sting. As UCL’s Professor Michael Grubb argues, the price differential between cheap renewables and hyper-expensive gas is now “unconscionable”.
What to do? Every energy producer should be required to incorporate as a public benefit company in emergency legislation, constitutionally forcing them to put the consumer interest before profit as their corporate purpose. Engaging with these newly constituted power generators, the regulator Ofgem should gather their now open book costs and calculate a standard tariff for all consumers that reflects the lower production costs of renewables and nuclear energy. Expensive gas-fired generators that would now make losses can apply to be nationalised (as the French did with EDF recently) or offered soft 50-year loans and grants to tide them over. It should be producers that take some of the hit over rising gas and oil prices; the hit should not be shouldered by consumers.
Planning laws should be instantly relaxed to allow onshore windfarm construction, with those local communities sharing some of the revenue. Interestingly, Grubb proposes the creation of “green power pools” in which renewable producers store their cheap energy for sale to consumers. There should be a crash programme of home insulation and the creation of a national network of electricity charge points for cars. Rebates on consumer energy bills should be targeted on the least well off.
This is the 21st-century agile state in action – a conception both Liz Truss and Rishi Sunak know will win them no votes from ageing Conservative party members who deify Mrs Thatcher. Instead, better to give away Britain’s stake in space and attack cheap renewables as “woke”. That pleases the Conservative party. The gulf between the real world and Tory world has never been so deep.
• Will Hutton is an Observer columnist