There's No Such Thing As Fuel Poverty. Just Poverty

The media, and politicians have been wittering on about fuel poverty, as energy prices surge, along with the rest of global inflation. But, there is no such thing as fuel poverty, any more than there is food poverty, or any other such type of phenomenon. There is only poverty, or more correctly, inadequate income/revenue. People need to have sufficient income to cover all of the basic requirements of their own reproduction, and that is comprised of all the commodities required for that, not any artificial separation of them into their individual components. In short, the problem is due to inadequate income not the high cost of this or that commodity.

In fact, it is always a choice of how to spend income for the purchase of various commodities, be they goods or services. People have different needs and desires, and so the way any available income is used will always differ from one household to another. Some will prefer to use income to buy a car, to have a bigger TV, and so on, whilst others will choose to have kids, and spend their income on them etc.

So, to talk of fuel poverty is meaningless, because its possible to shift some expenditure on other goods and services to fuel if that is what you choose. The problem, then, is that, if your income is inadequate in total, shifting your available income from food to heating – the choice of heating or eating – means you have not enough to eat. What was fuel poverty then becomes manifest as food poverty illustrating how meaningless such terminology is.

In fact, eating always takes precedence over heating, in such allocations, because without food you will die, whereas its possible to withstand cold, or take alternative measures. When I was a kid, growing up in a cold, damp terraced house, we had no running hot water, and no central or gas heating. We had just one coal fire in the living room, and a large gas boiler for boiling water used for washing clothes, and providing bath water. For a long time, baths were taken in the living room in a zinc bath tub, placed in front of the fire. In the Winter, when it was very cold, it was just cold, meaning you all sat close to the fire, and, at bedtime, you wore lots of clothes, put additional blankets on the bed, and took a hot water bottle to bed with you. In the morning, frequently, in Winter, there would be ice on the inside of the window panes. Going to the outside toilet in the middle of the night, was never an option, which is why we, instead, had buckets in the bedroom.

I am, not, of course, suggesting that everyone should think themselves lucky not to have to live in such conditions, today. We should, of course, expect that we have more civilised living standards, now. I am just illustrating that, choices on how to spend income, makes separating out different types of expenditure as a form of poverty irrational. Its equally possible, today, to wear more clothes, to have higher tog duvets, and so on, as a means of dealing with cold conditions rather than needing additional energy consumption. Whether, you should have to is, then, another matter.

Similarly, the proposals being put forward to deal with this “fuel poverty” are equally irrational, inefficient, expensive and distorting. The government is proposing a whole series of additional payments, and so on to give people money towards paying the additional energy costs. That means a whole swathe of new bureaucracy to implement such plans, money spent on that bureaucracy that is not going to deal with the actual problem.

The simple answer, rather than such methods, is to just raise the Minimum Wage to a level adequate to cover the additional costs, rather than the mealy mouthed payment that currently exists. Moreover, a Minimum Wage based upon an hourly wage is pointless. Back in the early 1980's, when the average hourly wage was around £5, I was being paid £25 an hour as a temporary lecturer. Marvellous I hear you say, and, of course, working 20 hours a week, indeed it would have been, 40 hours even better. The trouble was that, at best, it was only 10 hours a week often 5 hours a week, and towards the end of the college year as little as 2 hours a week meaning the actual wage was a fraction of what an average full-time wage was at the time. To be meaningful and effective, a Minimum Wage should be exactly that, a minimum for at least a week, and preferably a month.

If that was done, all of the palaver and bureaucracy required to make various individual payments would be done away with at a stroke. The other day, I heard Sonia Sodha argue in favour of increasing Tax Credits, but that is the last thing that is required. In fact, as I've argued before, it would be preferable to scrap Tax Credits altogether in favour of a combination of a much higher Minimum Wage, and a much higher basic unemployment and sickness benefit.

Tax Credits simply subsidise the inefficient low paying small capitalists who only exist on the back of underpaying their workers, knowing that the rest of us will make up their incomes via these various benefits. There is no reason why workers should want to do that, rather than having capital go to where it can be used efficiently, and so pay workers a living wage, and provide better conditions.

All of these ideas about Tax Credits, in work benefits, benefits to cover payment of this or that, Universal Basic Income, and so on, have been seen many times before, and are just the old petty-bourgeois attempts to encourage and subsidise small capital at the expense of the more progressive, more efficient large-scale capital, as, for example, Lenin set out in his arguments against the Narodniks.

The ideas put forward by the Parliamentary Labour Party are even more ludicrous, petty-bourgeois and inefficient. The PLP argue for paying out these benefits and paying for them by a windfall tax on the energy companies. Sheer madness. First of all, they fail to have noticed that many of these energy companies, rather than making surplus profits, are actually going bust, because they have faced much higher costs for the energy they supply, whilst being unable to pass those increased costs on to their customers. Some of that inability is directly related to the energy price cap, again a ridiculous concept, but even without it, they would have faced problems doing so, because, the larger energy suppliers had bought supplies on long-term futures contracts, so that the higher prices do not feed through directly into their costs, to the same degree.

The smaller energy supplies, who the liberals, now complaining about higher energy costs, encouraged into the market, only undercut the larger suppliers, because, rather than buy their energy on the basis of longer-term futures contracts, bought in the spot market, which was fine so long as energy prices continued to decline. In fact, this is precisely the same kind of situation that happened in the mortgage market in the early 2000's, when banks and building societies, stopped being concerned to obtain long-term capital from savers, and instead turned to borrowing short term, in the money markets, to obtain the funds required to provide 125% mortgages. Similarly, when those short-term money markets sent interest rates soaring, or stopped making money available altogether, the mortgage lenders starting going bust.

But, paying out various credits so that people can continue demanding energy at the same level is itself ludicrous, because what the increased cost of energy should do is to encourage a) a change in the nature of demand, and b) a change in supply in response to it. It should act as an incentive for people not only to use energy more efficiently – as happened when oil prices quadrupled in the 1970's – but also, to look at ways in which they can permanently reduce their energy consumption, for example, by spending money on better forms of heating, better insulation of homes and so on. Looking around my estate, the houses, being fairly new, are very well insulated. Although this house is nearly twice as big as my previous house, my energy bill is a fraction of what it was, because once its warmed up, the heat is retained. Even over the Winter, much of the time, the heating is not even on, not because of trying to save money, but simply because its not required. In fact, I see many of the houses on the estate with their bedroom windows open much of the time.

If consumers changed their behaviour so that energy suppliers saw demand dropping, they too would have to change their behaviour. They would have to look at alternative forms of energy for example, so that they could reduce their costs of production and supply. The PLP suggestion of a windfall tax does the opposite. It imposes additional costs on energy companies at a time when they are facing sharply rising costs of energy itself. That does nothing to encourage additional supply. Rather it does the opposite. By imposing this additional cost on energy companies, it reduces the rate of profit in that sector. Under capitalism, commodities are sold at their price of production, which is the cost of production (c + v), or k, plus average profit, p.  

A tax specific to energy companies, increases their costs, so that it is now, k + t. If the price at which the companies could sell their energy remained the same, then p would fall, but even if the energy companies simply passed on the increased cost represented by the tax in higher prices, p would still fall measured against k + t, i.e. p/k + t < p/k, so he rate of profit would fall, and capital employed in this sphere would no longer be making average profit. So, energy firms would have to raise prices by more than simply the additional cost represented by the tax, to again make average profit. They cannot simply do that by raising their prices, because of the operation of competition, and supply and demand. For the higher price to be sustainable, supply would have to fall, and as each firm tries to operate at its maximum potential, because that is most profitable, any such fall in supply can only come about by some of the existing energy companies going bust, and leaving the market. In other words, it would simply exacerbate the process that has already been underway in that regard as energy companies faced rising costs of production.

The PLP do not seem to understand that the higher energy prices are not the consequence of greedy energy companies simply deciding to hike prices, but are the consequence of rising costs of production, themselves exacerbated by the global inflation that has been caused by more than three decades of excessive liquidity being thrown into circulation to inflate asset prices. The conservative social-democrats of all the main bourgeois parties, across the globe, were the ones who encouraged that very process, as they sought to inflate asset prices, seeing in it a Magic Money Tree from which wealth was somehow magically produced without the need for labour to create new value, and from which they too could simply pick the fruit to cover their state spending on this or that project. Now that strange fruit is poisoning the system, and their remedy is to consume even more of it.

Again, Britain is suffering more than most as a result of Brexit which has caused its costs to rise more than those of other countries, and has significantly slowed the rate of turnover of capital, causing a consequent fall in its annual average rate of profit, which will again see, attempts to compensate by raising money prices, but, which will inevitably be followed by capital moving out of Britain to other economies not facing the problems of Brexit, and where the average rate of profit is higher. It is yet another stage in the long-term decline of British capitalism. Joining the EEC/EU slowed that process, but Brexit has now put rocket boosters under it. But, again, the conservative opportunists of the PLP, focused solely on short term electoral concerns, to appeal to a minority of elderly reactionaries, have even turned away from the obvious solution to that problem, which is a rapid about turn, and application to re-join the EU.