Long stories short
- Russian missiles hit a maternity ward in southern Ukraine.
- The UK’s Supreme Court ruled that Scotland could not hold an independence referendum without Westminster’s permission.
- The New York Philharmonic said it had more women than men for the first time in its 180-year history.
Grid reference of the day: 46.5667° N, 31.5167° E – the Kinburn Peninsula, the new Ukrainian front line on the left bank of the Dnipro River.
A government bailout of the UK’s seventh largest energy company could cost £6.5 billion, or £200 per household, and no one will say exactly why.
The company is Bulb Energy. Last November it was deemed too big to fail. As smaller firms went bust failing to bridge the gap between soaring wholesale prices and the energy price cap, Bulb was taken over by the government. Its founders left with £4 million apiece while taxpayers were left to pick up the tab.
So what? There are at least five reasons why the Bulb fiasco should be a lesson to ministers and voters.
1 – £6.5 billion is a lot of money. It’s nearly three times the last cost estimate for the Bulb bailout offered by the Office for Budget Responsibility (OBR) in March, and more than half the capital spending cuts announced in last week’s Autumn Statement. If Bulb’s own customers had to foot this bill it would cost them £4,300 each.
2 – Botched regulation. The Bulb story is a case study in the unintended consequences of years of blinkered faith in markets’ ability to bring down prices and conjure wealth from nothing. A micro-timeline:
1986 – Thatcher privatises British Gas, launching a three-decade experiment in energy deregulation.
2015 – The Deregulation Act 2015 levels the playing field for challenger energy companies to start peeling customers away from the Big Six with promises of lower prices and / or greener power.
2019 – The May government introduces a default energy price cap.
2021 – The world creeps out of lockdown, wholesale energy prices soar and more than 30 small UK energy firms go to the wall.
November 2021 – The then energy secretary Kwasi Kwarteng orders the Bulb bailout. Teneo, the outsourcing giant, takes over but doesn’t hedge future supply, spending £329 million on spot energy markets instead.
May 2022 – Kwarteng tells parliament hedging would have been “very risky” and an unwise use of taxpayers’ money. Not true. Hedging – buying ahead – is standard practice for all energy suppliers.
3 – Zero accountability. No executive or minister has resigned. Bulb’s founders, Hayden Wood and Amit Gudka, have moved on to a venture capital firm and a new energy start-up respectively. Kwarteng was briefly promoted to chancellor.
4 – Government secrecy. Why was Teneo advised not to hedge? Why has the cost of the bailout ballooned so far? Why was the £6.5 billion figure buried in a footnote on page 9 of the OBR assessment of the Autumn Statement? What are the terms of the takeover of Bulb’s 1.5 million customers by Octopus Energy last month? There are theories but no answers. One theory about the £6.5 billion number is that the government reversed itself on hedging to prepare Bulb for sale and committed it to hedges over the summer that turned out to be ruinous because of the energy futures price spike caused by the war in Ukraine.
5 – Unfairness. Hundreds of thousands of UK households are being forced into debt by energy bills as the entrepreneurs who wooed them as customers move on to new pastures and the government fails to fix the underlying causes of the energy crisis – Europe’s draughtiest housing and over-reliance on fossil fuels.
There are echoes in this mess of the last big UK government bailout, of the Royal Bank of Scotland in 2008; but also of the Cameron government’s humiliating dance with Greensill, the supply chain finance firm.
How many ministers does it take to fix a Bulb? Good question.
WORLD CUP 2022
Off the pitch, Messi plays for the team that just beat him
Lionel Messi played against Saudi Arabia in the kingdom’s historic victory over Argentina – but he also played for them, in a sense, in his role as tourist ambassador for Riyadh.
Messi’s vast global reach reflects the ability of football’s megastars to cross-pollinate paydays. Argentina want the 2030 World Cup. But so do Saudi Arabia.
CAPITAL ECONOMY, BUSINESS AND FINANCE
Xi Jinping hates disorder – remember Hong Kong? – but the Chinese people are rediscovering a taste for it. Last week they rioted because of a return to lockdown in Guangzhou. Last night workers at a Foxconn / Apple plant in Zhengzhou piled out of their dormitories to confront security staff at three in the morning, exasperated after a lockdown that has already lasted a month. Elsewhere, local authorities are flip-flopping on Covid rules, apparently confused as to whether Xi’s appointment this month to a third term is meant to signal a relaxation of the zero Covid regime… or not. The FT reckons Chinese cities under lockdown today account for 20 per cent of the country’s GDP. Xi wants growth of 5.5 per cent this year. Goldman Sachs forecasts barely half that.
TECHNOLOGY AI, SCIENCE AND NEW THINGS
Sometimes someone comes into your newsroom and nudges you back on course. Maria Ressa won the Nobel Peace Prize last year for her work tracking disinformation networks seeded by her own government in the Philippines. She’s been hounded, faces multiple arrest warrants and restrictions on her travel. Her newsroom, Rappler, has exposed the way dictators and democratically-elected leaders have crushed institutions from within and systematically damaged public trust. In our London newsroom last night, she said we live in a corrupted information ecosystem and an age of exponential lies. Algorithms have broken democracy and the job of restoring truth must be pursued at three speeds: long-term – education; medium-term – legislation; short-term – hand-to-hand combat. It was a needed reminder to pay attention, a hymn to civic engagement, and an inspirational call to challenge the manipulation of power by governments, nation-states and giant companies. Ressa’s newsroom’s mission was simple, she said: build communities of action and feed them with journalism. “We thought democracy was unstoppable – I fear we are going to lose it.”
The 100-year life health, education AND GOVERNMENT
Of the 308 English primary and secondary schools Ofsted inspected last year, 80 per cent of those previously rated as “outstanding” were downgraded. Most were revised down to “good” but 17 per cent were told they “need improvement” and 4 per cent were found to be “inadequate”. Behind the numbers: the reason for the inspections was a legislation change which previously made schools ruled as “outstanding” exempt from re-inspection (unless specific concerns were raised). The inspectorate now has 3,400 schools on its list to check again which they are planning to get through by July 2025. The first schools to be inspected were, understandably, those which hadn’t been for the longest period of time. In some cases, it had been 15 years since an Oftsed visit. So it’s also understandable to see changes in the report card. Still, some headteachers are calling the inspections “brutal” and “unfair” while the National Education Union, who are currently balloting their 300,000 members for strike action over pay, said Ofsted’s findings were “frequently unreliable”.
Our planet CLIMATE AND geopolitics
Greta Thunberg’s charity has donated £158,000 to cover the legal costs of reindeer herders fighting the approval of an iron mine in Sweden’s Arctic north. London-based Beowulf Mining was given a green light in March to excavate an area which, according to the indigenous Sami community, is one of the few viable migratory routes for reindeer herding and grazing. Many routes which the Sami rely on are already under pressure from changing snow conditions, logging, and the development of a hydroelectric dam. In their decade-long fight to prevent mining in Jokkmokk, the Sami have won the support of Unesco, the Swedish church and indigenous rights activists. Thunberg’s intervention will spur them on. Beowulf, on the other hand, seems to be suffering: its third quarter pre-tax loss was down 25 per cent year on year.
CULTURE soCIETY, IDENTITY AND BELONGING
Read the following carefully. Former Conservative MP Owen Paterson, a staunch Brexiteer and critic of the European Court of Human Rights, is suing the government in the European Court of Human Rights. His claim relates to Article 8 – the right to respect for private and family life. He argues that the parliamentary standards investigation last year, which found he broke the code of conduct, failed to disclose interests and engaged in paid lobbying, infringed on his right to privacy and was “not fair”. A reminder: Paterson picked up £112,000 a year from companies for which he lobbied, including Randox. Another reminder: former prime minister Boris Johnson’s initial rally of support around Paterson last year was the start of the standards row that brought Johnson down. His case is currently in the communication stage and could still be dismissed by the ECHR.
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Additional reporting by Barney Macintyre, David Taylor and Phoebe Davis.
Photographs Getty Images, Bulb
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