The mood of the country, we are told, is turning against years of government-imposed austerity. We are fed up with being squeezed by spending cuts; we are rebelling against 1% pay caps – and we are absolutely right to do so. But the real reason the average household feels so badly off is less to do with government cuts and more to do with profiteering by private companies.
Research this week by Santander blows the whistle on the ever-growing portion of our monthly pay that goes on largely unavoidable household bills. It looked at bills for gas, electricity, water, TV, phone and so on – and found they have escalated in price far, far ahead of average wage rises. Since 2006, average pay packets in Britain have gone up by 19% in pounds and pence terms (in other words, not adjusting for inflation). Meanwhile, the average gas bill has gone up 73%, electricity 72%, and water 41%.
These are extraordinarily large real rises, and all the grimmer for families and pensioners on very tight budgets. These are the bills that simply have to be paid, leaving families with harsh choices about what to cut elsewhere.
For those on average incomes, it means the axe falls on the nicer things in life, such as the annual holiday or the occasional meal out. At the bottom of the income scale, already suffering from cuts to welfare benefits, the “choice” is not between an iPhone 5 or 6, but between shivering or eating.
At the top of the utility companies the view is very different. Just weeks after arguing against consumers having their bills capped to save them £100 a year, the boss of one utility, SSE, was given a 72% pay rise to £2.92m after this “robust performance”. The reward comes after years of bumper dividend payouts which have doubled from 32.7p a share 10 years ago to 62.5p most recently.
The water companies have also been fabulous performers – for the stock market, not you. As a study by the University of Greenwich found last month, consumers are paying around £2.3bn more a year in water and sewerage bills to the privatised companies than if they had remained in state ownership.
It found they have invested no significant new shareholder equity, but have managed to extract nearly all of their post-tax profit as dividends. The report calculated that every household is worse off by around £100 a year as a result.
The Santander research into household costs found that it wasn’t just the energy and water companies stiffing us with rising bills. Council tax has risen by 27% since 2006, while TV, phone and broadband prices are up 24%. Every bill that Santander looked at had risen faster than wages. What’s more, its research didn’t include the biggest bill for most young adults – the rent.
Is the rise in bills a failure of privatisation? Mostly. But it’s also a failure of the sector regulators who are immersed in the neoliberal consensus that private markets and competition always provide the best outcomes for consumers. They can – but very often do not.
In my column last week I asked why Britain’s smart meter rollout was costing £11bn and France’s just £4bn. One industry insider contacted me to say that it was partly because France’s “Linky” programme is for electricity meters only, whereas the UK’s is both electricity and gas. But it’s also because France does not have competition among utility providers, and we do.
Here, each supplier has to install smart meters only for their own customers, which means they can’t just go “street to street” – they have to contact individual customers wherever they live, agree for them to allow access and organise engineers around that.
The result is that we will be wasting billions in duplicated activity, with the bill passed on to consumers to satisfy the rules on “competition” – and also ensuring shareholders continue to receive those dividends.
guardian.co.uk © Guardian News & Media Limited 2010