DON'T HOLD YOUR BREATH...

It started as a story in the Gruinad (The Guardian 13.11.2012) stating that the City watchdog, the Financial Services Authority, is now investigating claims by a whistleblower that the UK’s £300 billion wholesale gas market has been "regularly" manipulated by some of the big 6 power companies. The Guardian also notes that Ofgem (the energy regulator)  has been separately warned by a company responsible for setting so-called benchmark prices, ICIS Heren, that it had seen evidence of suspect trading on 28th September (this is end of the gas financial year) and gas prices on this date can have an important influence on future prices.

The claims suggest that dealers made unrealistic bids (on the 28th September) when information was being gathered to set the wholesale gas price, basically to suit their own trading position (maximise profits). The alleged manipulation is said to have reduced the wholesale price, and as such does not imply any knock-on impact on the retail price paid by customers. Later today the Con Dem Energy Secretary Ed Davey will make a statement to the House of Commons later as regulators investigate claims that wholesale gas prices have been manipulated.

Now the wholesale gas market includes everything from the UK's own North Sea gas supplies, to gas from Norway or elsewhere, or arriving in the UK by ship as LNG, liquefied natural gas. Energy companies buy gas at the wholesale price and then sell it on to businesses and domestic users. The cost of wholesale gas makes up the majority of our energy bills - 45% of the average energy bill is made up of the cost of wholesale gas, supply costs and profit margins.

The whistleblower, who worked for ICIS Heren, flagged up their concerns after identifying possible attempts to distort the prices reported by the company. These prices are especially important because many wholesale gas contracts are based on them and even small changes in the gas price can cost or save companies millions. These revelations come at an unfortunate time for UK’s energy sector, with many of the big six suppliers (the cartel) under fire for alleged profiteering on household energy bills and mis-selling on the doorstep. So far four of the UK's big six energy suppliers have released statements denying any involvement.

When it comes to regulation of the energy market the silence from the Con Dem Government has almost deafening. In the heady days of opposition, back in October 2009 the then Tory Energy Spokesman, Greg Clark (now Financial Secretary to the Treasury) stated that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by a Conservative Government. He also  condemned the unacceptable lag between the cost of wholesale gas prices and household energy bills and noted that customers were on average being charged some £74 pound too much for their energy per year.

An 'independent' investigation into the Energy Company’s refusal to pass on reductions in wholesale energy prices to customers would still be welcomed by many hard pressed energy customers. As would the promised 'Energy Revolution' which was supposed to overhaul the energy sector billing structure and charges.

In many ways it is somewhat ironic that we find ourselves here, as a Conservative Government started the whole sorry mess in the first place, by privatising the energy market in the first place. This threw any rational energy pricing structure upon the whims of the 'market' by allowing the newly privatised energy companies to price gouge customers in the first place and since the effective demise of any real competition in the ‘market place’ we have all been regularly fleeced.

As for any inquiry into irregularities in the energy market, it is worth noting that once in Government that was consigned quietly to the too difficult pile. The pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry (which has been subject to lengthy and repeated criticisms surrounding accusations of profiteering on electricity and gas) was quietly dropped by the Com Dem Coalition Government. So I won’t hold my breath.

NOT ABOVE THE LAW?

No one should above the law, be they politicians, bankers or the rest of us. The latest blatant illegality on the part of the banks should result in a criminal investigation into affairs at Barclays (the bank was fined £290m for manipulating LIBOR interest rates between 2005 and 2009). This latest criminal act is a direct result of the financial crisis and its lack of legal consequences, the banks (and the bankers) have got away with it in recent years. Where guilt and criminal intent can be established then those responsible should be charged for their crimes.

The banking sector has developed a culture of entitlement, with its something for nothing operating culture. The Financial Services Authority (FSA) has now established that there was systematic abuse and manipulation of interest rates in Barclays’ favour. Any individuals who illegally claim benefit or try to manipulate the system to their benefit run the risk of criminal convictions and prison terms – so why not the bankers who have rigged the market to the tune of billions of pounds? Since when has it been acceptable for a to be fined £290m and the only sanction is to offer to give up your bonus.

It is no more acceptable for the rich people to scam money than anyone else. Such behaviour might be acceptable under a New Labour or a Conservative Government but it is not acceptable to the rest of us. It is worth remembering that much of the illegality took place under the last Labour government, when Ed Balls and Ed Miliband and the rest of them were ‘relaxed’ about people becoming filthy rich.

There is little difference between New Labour and the Conservatives when it comes to their fawning attitude towards the mega-rich in the finance sector and it was their ‘light-touch’ (near nonexistent) regulation which helped City money men rake it in at our expense. The scandals over MPs expenses, newspaper phone hacking and the economic collapse all broke when New Labour were running the shop.

The Con –Dems and New Labour have been happy to stand up for the mega-rich and have cared little for the ordinary citizen. Resignations (and no doubt ‘golden parachutes’) are not acceptable; there have to be some real lasting consequences. So enough off the court of public opinion it’s time for some appearances in the law courts!

Budget Day

As we await the budget there is one thing we really need to avoid and that is cuts in the Welsh budget which would have a significant knock-on effect for small and medium sized businesses, customers and consumers alike, it will impact on government decision making and the Arts. Simply savaging public spending to help to cover the costs of bailing out the banks and to pay for the London Olympics is not acceptable.

If New Labour wants to make a difference on Budget Day, then it’s time to:

• Raise the tax threshold by £2,000 – this would put money in people’s pockets and take lower paid workers out of tax altogether.
• Tax should be genuinely progressive –with those earning over £100,000 being subject to a 50% rate
• Raise capital gains tax to match income tax levels.
• Cap increase in energy prices, it should not be choice of heat or eat.
• Bring in a Windfall tax on excessive energy profits.

When it comes to the banking and financial crisis, it’s time to:

• Support and develop the Financial Services Authority banking code.
• Deal with the banking bonus culture.
• Democratise corporate governance by empowering shareholders.
• Ensure that lenders are held culpable if they lend money to individuals who are clearly not in a position to service incurred debt.
• Work to bring in an international regulatory financial framework.
• Work to create a global register of hedge funds, and
• Curb the ability to asset strip solvent financial organisations.

In Wales, we already receive a less than fair financial settlement, we simply cannot cope with further cuts and the UK Treasury needs to understand this, even Gordon Brown has admitted that public spending should not be cut in a time of recession. Yet, in Wales we have already received a damaging financial settlement from the New London Labour government that has already been condemned by our local authorities and other sectors.

If New Labour are serious about dealing with the financial crisis, rather than awaiting electoral oblivion, then it's time to:

• Reverse the banking trend of the last 50 years which has centralised our financial institutions.
• It's time to encourage regionally based banks and lending institutions.
• We need to support the mutual model for personal finance.
• It's time to further develop micro-finance with more support for credit unions.
• We need to develop low interest banking networks, and
• Work to bring an end to tax havens.

In Wales, Plaid Ministers of the Plaid driven One Wales government have been and are working to shelter the people of Wales from the developing economic storm, but if proposed budget cuts go ahead then our Ministers hands will be tied and their ability to act in the interests of the Welsh people will be significantly reduced.

Any proposed Treasury cuts could have a devastating impact on our communities and the Welsh people would rightly never forgive the New Labour London government if it slashes Wales’ budget even further at this time.