Reynolds: Nationalisation “not part of our response” to cost-of-living crisis

Labour’s Jonathan Reynolds has said that nationalisation is “not part of our response” to the cost-of-living crisis after Gordon Brown urged the government to consider public ownership as a response to rapidly rising energy bills.

In a Sky News interview this morning, the Shadow Business and Industrial Strategy warned that there are “limitations” that result from the UK having had to increase public borrowing in response to the coronavirus pandemic.

His comments followed an article by the former Labour Prime Minister in The Guardian on Wednesday, in which Brown argued that energy companies that cannot offer lower bills should be temporarily brought into public ownership.

“Instead of allowing Ofgem to announce an increase on a scale that will send shock waves through every household, the government should pause any further increase in the cap; assess the actual costs of the energy supplies being sold to consumers by the major companies; and, after reviewing the profit margins, and examining how to make standing charges and social tariffs more progressive, negotiate separate company agreements to keep prices down,” he wrote.

“They should work with businesses to cut consumption, as is happening in France and Spain, which have imposed their own cap on energy prices, dictated more by what people can afford than the current wholesale gas price in the marketplace.

“And if the companies cannot meet these new requirements, we should consider all the options we used with the banks in 2009: guaranteed loans, equity financing and, if this fails, as a last resort, operate their essential services from the public sector until the crisis is over.”

Reynolds said this morning that Brown was “right to say that the state has to act as the supplier of last resort to make sure people can get gas and electric if their supplier goes out of business”, which he said is “already broadly the case in terms of how the system works”.

“You can take supply companies into public ownership but that’s not going to solve the problem. The windfall is accruing on the production side and therefore that’s why the windfall tax is the right intervention – to take a share of that windfall for the benefit of the economy as a whole, and that’s the right thing to do,” he told viewers.

“That is the action that is required. In itself, bringing a company into public ownership isn’t a response to the crisis, but he’s right to say the state has to guarantee the supply of energy.”

Asked specifically whether Labour is against nationalisation, he said: “It’s not part of our response to the cost of living because what is required there is direct financial support for people, which we would raise through a windfall tax.

“It’s important to say, obviously, that if you look at where the country has been – coming through the pandemic, borrowing a lot of money – that was absolutely the right thing to do, but over time the share of debt to the size of the economy does have to shrink and there are limitations that come from the fact that you’ve had to increase public borrowing in response to the pandemic.”

Labour announced today that it would scrap “outrageous” energy premiums that customers using prepayments meters face as the first part of a fuller package that the opposition party is expected to announce to combat spiralling prices.

Ed Miliband accused the Tories of being “missing in action” as households face the crisis of spiralling bills and prices after the government failed to agree any new support measures in a meeting with energy company executives on Thursday.

After the meeting, the Treasury revealed that Nadhim Zahawi and the energy firms had agreed to “work closely” over the coming weeks to “ensure that the public, including vulnerable customers, are supported”. But Boris Johnson has insisted that it will fall to his successor to make “significant fiscal decisions”.