After Ed Milliband announced what he was going to do to curb the excesses of these companies, the press seem to be saying that they have not been ripping us off. I thought it was an aknowledged fact that they were before this week! What do people think - should we have been thanking them?
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No way.
There's even less argument for 'the market' where the rail companies are concerned - since last I looked, it wasn't possible to travel on a different track right next to the one that is situated between where you need to get to and where you currently are because - surprise, surprise - those tracks don't exist. Rail privatisation is the biggest con job ever pulled on the people of the UK.
This is the problem in a nutsehll - socialism doesn't work because of greed - capitalism doesn't work for the same reason.
Here's a few comparisons:
Centrica (owners of the British Gas franchise) Turnover £23.9bn, Profit £1.4bn. A profit ratio of about 5.85%
Tesco Turnover £72.4bn, Profit £3.5bn About 4.8% (But a poor year for them.)
VW Turnover Euro 192bn Profit Euro 25.4 bn. About 13%.
So, if Red Ed wanted to do actually do something useful, he'd be thinking about freezing the price of new German cars not gas and electricity prices!
Let's assume Milliband The Stupid does become Prime Minister and freezes prices as promised. First. it will probably not apply to prices charged to businesses and government (both local and central) whose power costs will increase hugely. Those extra costs will be passed on to, yes that's right, consumers, who will quickly see price inflation and extra taxation eating into any savings they might make. (And heavy power users, the car manufacturers, etc might consider shifting their production elsewhere.)
Second, the power companies' (currently not unreasonable) profit levels will drop (possibly disappear) and dividends to shareholders will drop. In the main, shareholders are fund mangers, so we'll all see our pension pots reduce in value.
Third, Centrica (and the others) will shed some staff who will not therefore be paying tax and the Govt, will lose around a £1bn a year in corporartion tax from Centrica alone.
It is, I suppose also possible that some companies will say stuff this and refuse to do business in the UK any more. Don't forget that four of the big six players are foreign companies. EDF is French, Npower and Eon are German and Scottish Power is Spanish.
Edward's scheme has disaster written all over it.
You need gas and electric, and people making huge sums of money off people's needs (in my view) is wrong. Plus it's basically an Oligopoly which means that the public are not receiving a fair price, which they would under a more competitive market.
However something needed to be done and at least Labour have been first to react. Ever increasing energy prices, well above inflation, are putting a massive strain on the cost of living. At the moment the government have no solution whatsoever and need to respond. My suggestion, scrapping the regulation on the industry that drive up prices and removing the taxes that depress their income, this will relieve energy costs in the short-term. In the long term the Competition Commission needs to break up the Oligopoly power of the Big 6 putting a stop to price-fixing in the industry, increasing competitiveness and subsequently driving down prices.
The utilities were sold off cheap and are a one way bet unless regulated. They are not the same as VW or Tesco .
I run an SME and I can assure you we are at the mercy of market forces of competition unlike rail or utilities .
Ironically, most large free marketeers don'twant to be exposed to the forces of competition.
The fact of the matter is you can call Milliband all the silly names you like ( and he is a lousy Labour leader in my opinion ) , the people on the boards of these utility companies all went to the same public schools and socialise in the same circles as David Cameron and George Osbourne so they are NEVER going to crack down on their mates.
Like it or leave it , if you do want these companies to be penalises for ripping us off it ain't going to happen under a Tory government or a Tory Coalition.
The one that Ed slipped under the radar somewhat was lowering the voting age to 16, IMO much more worrying.
Having said that the energy companies could trade in the futures and derivatives markets for basically enough energy to power the whole of the UK, which of course would come at a premium... Which would be paid by us...
Energy companies have their margins of profit regulated (I am not claiming to be a sage on this subject by the way so feel free to correct me). Meaning that the reasons energy companies make record profits is because of high wholesale prices, as if say gas costs them 100p a unit and they can make 5% they get 105p (5p profit) but if it rises to 110 they get 5.5p profit.
Added to this the fact that harsh winters etc add to the amount of fuel used and there you have record profits.
That is of course if everything works correctly within the frame of regulation, which I would not say is a definite by any stretch
Either way Milliband is talking a big game about this cost of living crisis as he calls it, if he could do something about it (and I very much doubt he could) then it would be applauded.
So I'm moving to the country...(I'm gonna eat a lot of peaches).
There are those that think interfering with a market - even if it is broken is sacrilege but what do you do if you think consumers are being ripped off – do you just leave things alone?
As for the rail companies – the issue is different but equally worrying. They are acknowledged to be badly run and inefficient but make big profits all the same due to massive government subsidies and fare increases. The Government tries to cut the subsidies and they increase the fares so profits are maintained. It must be pretty hard not to make a profit if you are a rail company and I’m not sure what kind of free market they are operating in?
Not sure nationalising railways would be a good idea but something needs to be done. They are ridiculously bad at the moment (especially south eastern) They are never clean, the air conditioning is bad, the toilets never get maintained, the customer service is bad and they do small carriages when it's rush hour time which mean commuters can't sit down. Yet the price constantly increases and I have no idea why apart from greed.
I think the HS2 is a very bad idea, it's bad for the Countryside and we have a good network around the UK so why on earth are we building a new railway line when the current ones can be upgraded.