Government hesitancy over Britain’s energy crisis


Max Abdulgani analyses Britain's energy security amid a cost of living crisis

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Image by Erik Wilde

By Max Abdulgani

Britain faces a monumental energy crisis, the likes of which have not been seen since the late 1970s. Global supply chains face an unprecedented challenge, one which has the potential to disrupt the basic logistics of trading goods and services now and into the future. The UK’s energy security is weaker due to dwindling supplies of natural gas being outstripped by high demand, and Britain has become a nation almost completely reliant on imports of electricity and gas; with net electricity imports rising by 37 per cent between 2020 and 2021.

Russian aggression in Ukraine now means the impending decline of these imports, which we have become so reliant on, and leaves us woefully unprepared for the next decade of energy supply. All of this comes at a crucial time; when a cost of living crisis looms over our heads and is disproportionately impacting the poorest in society. Questions that the government may be considering at this time include how they can mitigate the impact of sky-high energy prices and soaring inflation without significantly raising taxation on businesses, as well as how they can tackle the ongoing fiscal money over-supply. One thing is certain though – solving the energy crisis won’t be easy. It will take not just short-term responsive governance, but long-term statecraft, diligence and graft.

The Ukraine crisis demands the involvement of Britain in a globally coordinated effort to tackle the energy supply shortage in a vital effort to replace Russian imports. Countries that are reliant on Russian energy are now greatly threatened by the realities of the war in Ukraine and its consequences on the global stage. Sanctions that have been imposed on Russia have forced many leaders to consider alternative energy and oil sources, including the likes of Saudi Arabia. Though this regime’s track record on human rights isn’t hugely distinguishable from Russia’s, a global crisis of this scale arguably requires immediate solutions.

The longer term picture is very different. Energy self-sufficiency has been pitched as the only way to prevent mass shortages across the world in the future. Using nuclear energy, it has been suggested, would solve many of the same problems including shortages. The primary dilemma Britain faces is a crisis of confidence in global markets to secure not just the supply of energy we need, but a sustainable amount of it. Many argue that global coordination on energy has over-seen the rise of dependency at a time when we need interdependency. Russian aggression has thrown the world’s energy security into doubt.

With the highest inflation rate since 1992, energy prices in recent times have risen by 54 per cent and companies such as BP have received profit margins significantly above average, prompting the Labour Party and the Liberal Democrats to call for a one-off windfall tax on energy companies. For weeks the government resisted these demands, before conceding with the imposition of a £5 billion tax. The move comes as part of a £15 billion national package designed to soften the impact of the cost of living crisis on consumers. While the one-off tax on energy companies may be welcomed by many, it comes at a time when consumers are facing an increase in National Insurance contributions as those claiming Universal Credit face the implications of a reduction in uplift payments.

Opposition parties argue that families will be roughly £3000 worse off due to 15 tax rises implemented by the government in the space of two years. This comes from fresh data released by The Centre for Economics and Business Research consultancy after a survey conducted with over 2000 bill-payers. Britain is currently in the unique position of having low standards of living combined with a historically high cost of living. Standards of living have in fact been falling at the fastest rate since the 1950’s. In response to claims that the Conservatives are a party of high taxes and low growth, however, the Chancellor Rishi Sunak has stated that Britain has just been through a pandemic and in the Autumn “we will cut your taxes.”

This comes on a path to “higher productivity, higher living standards and a more prosperous and secure future.” Questions remain over how the government can still claim to be a party of low taxes and high growth, when currently they are demonstrating the opposite. Figures including the Shadow Chief Secretary to the Treasury Pat McFadden have accused the government of ‘boosting Tory election hopes’ by increasing income taxes now before planning to cut them in the run-up to the next election. The energy and cost of living crisis, opposition parties have said, demands a response that will put to bed fears of families having to ‘choose between heating and eating’ in the future.

Whilst the brutalities of war continue, Britain’s energy crisis will only worsen as time goes by. The government has some serious and compelling decisions to make including the way in which they will solve the cost of living crisis with both immediate and long-term solutions. Key decisions need to be made about how to handle the impending decline of imports at a time when demand is high, and how they can ease the burden of increased taxation at a time of high prices and energy.