Interventions have merit, but government mustn’t get hooked on meddling
The drumbeat towards another Sunakian save-the-day package has begun, it seems. It is barely weeks since the Chancellor’s first energy market intervention, a devillishly complicated scheme of rebates and discounts to reduce the pain of higher energy prices. Russia’s invasion of Ukraine has now added further upward pressure on those same costs, and it is perhaps unsurprising then that the Treasury is already said to be playing with the idea of a more generous scheme to coincide with the seemingly inevitable further jump in the ‘price cap’ in October.
It is fair to say that this government has been unlucky. It would not have chosen the circumstances it has been granted – from a global pandemic to a war in Europe very much not of its making. But it is also true that the prevailing narrative at all times has been, to paraphrase Ronald Reagan, to stand ‘here to help’ with lashings of government cash.
On each individual case, most notably during the Covid-19 pandemic, there has been ample reason for government to get involved. No other institution could have, for instance, rolled out the furlough scheme, or chivvied banks into releasing emergency loans with barely any due diligence. But one wonders whether the government has got altogether too used to saving the day, with nasty fiscal consequences for tomorrow. The latest intervention is the plan to take a twenty per cent stake in the nuclear plant planned for Sizewell C.
It sees itself, alongside EDF, as a cornerstone investor that will attract further private capital. There are even whisperings that the changes to Solvency 2 regulations will make it easier for British, private firms – from pension funds to insurers – to take a stake in these grand projects. On its own, there are merits to the decision to throw the state’s weight behind another grand project. There is greater merit in allowing the market to decide if it’s worth doing, however.
Government cannot solve everything – and shouldn’t try.