Posts tagged ‘subsidies’

June 22, 2013

Millionaire Carpetbaggers


How on earth have we come to the point where a company can be successful, pay its directors big bucks and substantial dividends to its shareholders and be in receipt of public subsidies?

Large-scale farms, high profile entrepreneurs, pharmaceutical giants, multi-national corporations surely should not be taking public handouts – but they are.

Every successful business knows you have to speculate to accumulate but with whose cash?


Innovation often comes at the end of years of research. Good research costs and success is never guaranteed but there are ways of alleviating overheads. Super successful giant Apple was helped on its way by a $500 000 research programme paid for by the US government. But once Apple became successful where was the quid pro quo? There was none.

Where a private enterprise uses publicly funded and operated facilities shouldn’t there be some means by which the intellectual property becomes a stake in the enterprise for which a percentage comes back to the public body in profits?

It’s not just Apple, Google too built its empire on an algorithm funded by the National Science Foundation, a government funded agency in the US. Shouldn’t some of that success have been shared with the NSF?

That is not how the world of entrepreneurship works. Not only do companies walk away with all the benefits provided by the taxes of Mr and Ms Average but many of them take advantage of every loophole to avoid paying taxes which support the social fabric which underpins the lives of Mr and Ms Average.

When I hear people proclaim how successful capitalism is I wonder how they calculate success. Being dependent on state subsidies is not being successful.

They provide jobs it is claimed. But where? Not necessarily in the countries where they got the leg-up. Large parts of Apple’s production takes place outside the US.  Can you think why?

And it’s not just in the USA.

Every year £4bn of our cash is paid to subsidise franchise rail companies in the UK. I don’t object to paying for utilities. I do object to paying private companies subsidies which are integral to their success and allow them to pay out handsome salaries to directors and dividends to shareholders.

Why have access costs to Britain’s rail tracks been slashed since the 1990s? Because public money is being poured in to offset the actual charges which should be made by rail companies which then appear more efficient than they are and enable them to pay dividends to their investors. Whatever happened to the free market? Network Rail issues private bonds that are publicly guaranteed – to the tune of around £30 billion which means that it can then charge, say Branson’s Virgin Rail, artificially low charges for track access.

The £½ billion profits made by the Virgin rail franchise tells its own story: charismatic entrepreneur shakes up inefficient public institution and transforms it into a success.  Believe that if you like.

The billions that have gone on subsidising the rail system disguises the truth about privatisation. Money not only goes to allow them to operate but to finance their management and pay out to shareholders.

Everyone knows about the profits enjoyed by pharmaceutical companies. They, of course, have their own laboratories but they also benefit from research funded from the public purse as we’ve seen in the US. Fair enough but what isn’t fair is that once a drug has been proven a winner and being sold around the globe there is no pay-back in the form of sharing that success with the state that funded its new multi-billion drug. Instead we pay for the development of the new medicine and we pay to buy that same medicine. We pay and we pay again.

Where is the public interest in this arrangement? If we are paying for research why aren’t pharmaceuticals nationalised to provide us with cheaper medicines? If the pharmaceutical companies can do without publicly funded research why aren’t they?

If Virgin and the rest are able to pay dividends to their shareholders why aren’t they able to pay back public subsidies? More to the point why are they recipients of any public subsidies? Why do we have franchised rail companies if they cannot operate without state help? Why are they taking our money and labelling them as their ‘profits’?

If you can’t afford to operate a rail franchise or are not some cool dude with a keen eye for a canny business setup then there are still ways of raking in public money. You could take a piece of land out of agriculture for example.

Anyone who owns land may be able to pick up Farm Woodland Payments which run from £121 to £60 per acre.

The less you earn through agriculture in relation to your overall income the lower the subsidy you can claim but if you own a country pile, let’s say, and perhaps earn your living elsewhere, perhaps in a rail franchise, then you might think of setting up a separate farming business on that country plot. Do this and your other income is ignored and you will be free to pick up your public subsidy. If you remember to register your farming business for VAT you will be able to save in running this agri concern, whatever it is.

How does £85 an acre each year sound? For townies an acre isn’t much land but we’re not talking the odd acre here. This handy sum can be had under the Single Farm Payment. Add to this the Environmental subsidy which goes from £12 to a whopping £121 an acre and you’re talking lots and lots of cash for just being you. These two subsidies alone for doing sweet nothing amount to around £200 for every acre around your pile. Not to be sniffed at – enough not to worry about having to have the oiks constantly traipsing around your grounds and charging them for the privilege.

In Scotland under 19 000 landowners/businesses receive £484,528,467 in Single Farm Payments  and if you think, single payment sounds puny then how about Torphins farming business Frank Smart and Son who were the lucky recipients of a cool £3.2 million in 2012. I’ve rounded it down for simplicity. And don’t go away with the idea that times are tough and we’re all in it together – the Smarts subsidy from us rose by £781,853. 93 from their previous handout. In 2009 the Smart business was handed a mere £1.2 million – does this mean it has become less efficient to the tune of £2 million?

You may want to pause for a cup of tea to digest these figures. They amount to money. From you and more importantly, from me.

I can’t get my head around the fact that anyone who can claim £3 million is in any way entitled to public handouts. The lists of land subsidy winners is a who’s who of estate owners and big knobs from British society. Outside of Scotland the Queen and Duke of Westminster also benefit from public handouts.

Landowners, at least farmers, can buy up entitlements to subsidies – that is buy land away from their main holding which may or may not be farmed but which adds to their business portfolio.  

If you’re serious about your land you might actually farm it and then you can claim some of the £21 918 281 paid out to Scotland’s nearly 8 000 beef producers (farmers).

If your land is not up to supporting beasts don’t worry. You can still get your hands on public dosh through the Less Favoured Area Support Scheme. Last year 11 000 Scottish land owners were able to claim £66 533 651.

It is a very very long time since farming went it alone in this country. Fear of food shortages led to agri subsidies and, well, have you ever tried to get money off a farmer?

The president of the Scottish Farming Union recently declared the arrangement for SFPs was wrong. He was responding to complaints that some farmers are unable to claim subsidies but why are we still paying out subsidies to them at all?

There are other agri subsidies such as Weather Aid. This is a pot of £6 million to cushion the blow of the impact of extreme weather on farming production such as loss of stock or arable crops.

But back to the railways. New Labour in government completed the privatisation of Britain’s rail services and so enabled the system where private rail franchises are able to claim subsidies higher than the premiums they pay to the government for the franchises they claim to be able to run efficiently.

Where is the sense in that?

Virgin receives 3.6 p per passenger mile to the tune of £133 million. Of £41 million pre-tax profits it provided £29 million to shareholders. At the same time the east coast service receives 0.5 pence each passenger mile.

Virgin has denied any imbalance.

The system of subsidies in this country is a win win for those who are prepared to work the system. At a time when seriously ill and disabled claimants are having their incomes reduced by changes to DLA is it acceptable that multi-nationals, landowners, pharma giants and the rest are being provided with non-returnable public money collected from our taxes? Talking of taxes – another day.

Any private company reliant on the state for subsidies is a failing business. If the state has to act to finance any private organisation then the state should take over its business.  Don’t tell me the state is necessarily more inefficient. What we have now is subsidy-junky culture which camouflages failures in private enterprise. Why are we pretending private is better than public in cases when it is patently incapable of supporting itself or unwilling to do so? It used to be that the free market was a risky place to enter but for some that element has been removed knowing failure will be underwritten by those of us who pay our taxes.

See also

June 3, 2012

And the energy subsidies go NUCLEAR

Whenever there is a debate about energy someone usually pipes up with a comment about how important it is to have a spread of energy sources. That’s the tell. They don’t mean spread. They mean nuclear. The next statement is how renewables are simply uneconomic; they depend on huge government subsidies and so have an unfair advantage over other forms of energy such as nuclear which has to stand on its own. As if nuclear power isn’t subsidised. In fact is so subsidised even the government is embarrassed to reveal the extent of its support for this controversial industry. The UK government plans to build 8 new reactors over the next 10 years to help meet its climate change and energy security goals and is turning to nuclear to achieve these targets. Just how far is it prepared to go to ensure it can get new nuclear plants onboard? Are there differences between what the government says publicly about new nuclear and what is being written into contracts between the two? What do people mean when they report that the nuclear industry is being subsidised by taxpayers? Last year the UK government was telling us that nuclear power was and will continue to be the cheapest means of producing low-carbon energy for at least a decade. At the same time the Energy and Climate Change Select Committee (DECC) was producing a report urging government ministers to admit the extent of subsidies going towards nuclear energy producers when the official line was that new nuclear power stations would receive no public subsidy. The nuclear industry wouldn’t play. It demanded inducements to build new plant and the government responded with offering a guaranteed price for nuclear power- a floor price with any shortfall being paid by public funds..The Carbon Floor price set to start in April 2013 is designed to ensure electricity producers will pay around £15.70/tonne CO2e in 2013 rising to £70/tonne CO2e by 2030. .According to Caroline Lucas of the Green Party this will result in ‘handouts of around £50m a year to existing nuclear generators’. The government aims to support nuclear as a low carbon source of energy and as the initial costs of nuclear power stations are huge, the nuclear industry wants to be certain of a rate of return. Caught in a bind over its promises not to subsidies nuclear, the government has tried to disguise its support under a cover-all system to low carbon energy producers. Placing a cap on the nuclear industry’s responsibilities in the event of an accident is important because should that occur the implications are huge – think of Fukushimo for a moment. How many billions have been spent post-Tsunami clean up? It is not a case of repairing and getting back into operation, the nuclear industry in Japan is struggling to get back to producing some energy with two of the 50 or so reactors being restarted in August 2012 despite immense opposition from the Japanese people. Understandably they are afraid of further devastating nuclear accidents and then there is the question of who is ultimately responsible for cleaning up following the unexpected. No industry could afford to take on the real costs they are so massive and therefore the burden falls on taxpayers. In the light of Japan, the UK and other governments have been pushed into taking on responsibility for underwriting the nuclear industry. The proposal is that nuclear operators will only pay the first £1billion of any accident – an amount well below the real cost of tackling a major disaster. In fact £1bn is even well below the cost of cleaning up one plant in Japan. Energy Fair is a campaign organisation which can throw light on the secretive relationship between government and the nuclear industry. It calls for a level playing field in the energy sector so that renewables are not left to struggle against the protected nuclear sector. Dr Dörte Fouquet is a senior partner of the law firm Becker Büttner Held (BBH) and a Director of the European renewable Energies Federation. Antony Froggatt is an energy policy consultant and senior research fellow at Chatham House. Dr David Lowry is a research policy consultant and specialist in nuclear issues. Pete Roche is an energy consultant and policy adviser to the Scottish Nuclear Free Local Authorities and the National Steering Committee of United Kingdom Nuclear Free Local Authorities. Professor Stephen Thomas is an energy policy researcher at University of Greenwich Business School. Dr Gerry Wolff is a co-ordinator with Desertec-UK and the Kyoto2 Support Group. Energy Fair has identified 7 main subsidies provided to the UK nuclear industry. ‘Limitations on liabilities: The operators of nuclear plants pay much less than the full cost of insuring against a Chernobyl-style accident or worse.  • Underwriting of commercial risks: The Government necessarily underwrites the commercial risks of nuclear power because, for political reasons, the operators of nuclear plants cannot be allowed to fail.  • Subsidies in protection against terrorist attacks: Because protection against terrorist attacks can only ever be partial, the Government and the public are exposed to risk and corresponding costs.  • Subsidies for the short-to-medium-term cost of disposing of nuclear waste: In UK government proposals, the Government is likely to bear much the risk of the risk of cost overruns in the disposal of nuclear waste.  • Subsidies in the long-term cost of disposing of nuclear waste: With categories of nuclear waste that will remain dangerous for thousands of years, there will be costs arising from the dangers of the waste and the need to manage it. These costs will be borne by future generations, but they will receive no compensating benefit.  • Underwriting the cost of decommissioning nuclear plants: In UK government proposals, the Government is likely to bear much the risk of cost overruns in decommissioning nuclear plants.  • Institutional support for nuclear power: the UK government is providing various forms of institutional support for the nuclear industry.’   ‘With regard to proposed new nuclear power stations in the UK, they may receive support via loan guarantees, tax breaks, or other financial instruments and there is concern that, directly or indirectly, such support may be provided for the building of nuclear power stations in the UK. Several of these subsidies are so large that withdrawal of just one of them would make nuclear power entirely uncompetitive. For example, full insurance against nuclear disasters would increase the price of nuclear electricity by a range of values—€ 0.14 per kWh up to € 2.36 per kWh—depending on assumptions made.’ it is now well established that nuclear power is one of the most expensive ways of generating electricity.2 Bearing in mind that there are now several reports showing how to decarbonise the world’s economies without nuclear power,3 that nuclear power is far from being zero carbon,4 that there are more than enough alternatives,5 and that those alternatives are quicker to build and have none of the headaches of nuclear power,6 there is absolutely no case for new nuclear power plants anywhere in the world. In terms of the fight against climate change, money spent on nuclear power is a mis-allocation of resources. The alternatives are quicker and cheaper. 2 Information on that point, with links to relevant sources, may be seen at 3 See Section 0 and 4 See 5 See Section 0 and 6 See The UK government plans to increase the cap on liabilities to $1.7billiion from the current £140million. Fukushima’s clean up could cost as much as $250billion.  BP set aside £41billion to cover claims from its Gulf of Mexico disaster. The nuclear industry is paying well below the true cost of insurance against nuclear disaster. If they were forced to pay the full costs they would simply not be viable. The nuclear industry depends on government support. Without this help it would be incapable of funding itself. However, profits remain private. And note there is nothing equivalent for renewables. “… a fully commercial price would make disposal far too expensive, killing the prospects of any new nuclear build programme in Britain …. The bottom line is that nuclear energy utilities probably need fixed waste disposal ‘prices’ for repository disposal capped somewhere in the range from £12,200 to £24,400/m3, but the NDA’s [Nuclear Decommissioning Authority’s] true marginal ‘cost’ is nearer to £67,000/m3, and the commercial ‘value’ of the repository asset could approach £201,000/m3 if operated as a fully private sector venture.”

Ian Jackson: Nuclear Engineering International April 2008

“The government must undercharge the industry for disposing of its waste in order that the industry can establish itself and it is the government which ‘absorbs the final-end risk.’

Dieter Helm, Professor of Energy Policy, New College, Oxford from Energy Fair Report 2012

As well as advantageous deals set up between government and the nuclear industry there is the grim reality that this industry is fraught with dangers: leaks of radioactive material; the ever-present fear of terrorist attacks; the inherent dangers when nuclear fuel and waste is being shipped overland in trains and on the seas. Nuclear power is not as economically efficient as its supporters would have us believe. Its dependency upon subsidies surprises us because we are forever being told that it is other forms of energy which are the recipients of public money. The truth is a little more complex. The dangers inherent in nuclear power are very different from other energy producers. The potential damage on the population, and not only in the immediate area of any nuclear station, are scary not only in terms of fatalities but health issues which can affect generations. For nuclear companies to take out adequate insurance cover to meet every eventuality would make the industry uneconomic. The cost of producing electricity in such circumstances would push up the price greatly to the consumer by at least 12 pence per kilowatt and possibly as much as 240pence. What this comes down to is we would be paying twice as much for nuclear energy if we paid its real cost. Currently we don’t because the nuclear industry is being shored up by the government. This is not what the Department of Energy and Climate Change (DECC)at Westminster tells us however. New nuclear operators will be required by law to put money aside from day one to pay for the eventual decommissioning costs and their full share of waste disposal. This is in line with the coalition commitment that new nuclear can proceed provided there is no specific subsidy


and also: We are confident that our proposals to reform the electricity market to incentivise all low carbon generation are entirely consistent with that policy of no subsidy The nuclear industry is paranoid. The French energy giant, EDF which produces much of its electricity through nuclear, was recently fined for spying on Greenpeace campaigners and two of those charged with spying – including hacking computers-  were jailed. EDF runs 8 nuclear stations in the UK and plans to build 4 more nuclear reactors here for the government. “Tom Burke, formerly head of Friends of the Earth UK and a visiting professor at Imperial and University Colleges in London, said the spying case showed EDF was desperate to negate criticism of nuclear power. “What this judgement reveals is that EDF, and the French government which owns it, are prepared to go to any lengths, including breaking the law, in order to defeat opposition to more nuclear power,” he told BBC News. “The whole future of the French plan to sell more nuclear power to the world depends on getting the British consumer to pay to build new nuclear reactors in Britain. “I would advise every critic of the French drive to expand nuclear power in Britain to be very vigilant in ensuring they are not themselves victims of EDF dirty tricks.” Greenpeace has said in the past that it suspected EDF of using “dirty tricks” against it in the UK as well as in France – a charge that the company has denied.”


There are echoes here of the sinking of the Greenpeace ship the Rainbow Warrior (formerly the Aberdeen vessel Sir William Hardy) in 1985 when the French government acted to prevent Greenpeace interfering with its nuclear testing in the Pacific. In France the two big electricity producers are mainly state owned. Nuclear fission accounts for around 80% of French electricity. Germany’s plan to have 35% of power produced by renewables by 2020 has its supporters among the French but there are inevitably others who believe that Germany will be forced to resort to nuclear at some point in the future- still pushing the myth that nuclear is the cheaper option. While the French meanwhile continue down the road of nuclear energy, Germany’s plan to phase it out has left some unhappy about French plants close to their borders. Commenting on the safety record of the nuclear industry in France, Axel Mayer, of the environmental group Bund in Freiburg, responds: “Fukushima also worked safely for 30 years but now, after Fukushima, we see things differently; and if we have an accident in Fessenheim, the radioactive water won’t go into the ocean, it’ll go into the Rhine, and then it’s not a problem of the area, it’s a problem of Europe.”


In the UK the government cannot imagine being able to keep the lights on in the future without nuclear. Craig Bennett, director of policy and campaigns with Friends of the Earth disagrees. But nuclear power can’t be part of the answer – our analysis shows it will divert vital money and effort away from developing renewable energy, and the jobs and industries it could bring to the UK. We’ve had 50 years of successive governments pandering to the nuclear lobby. If their promises of cheap, low-carbon energy were true, they would have been delivered by now. On decommissioning nuclear power stations, the Energy Act of 2008 insisted that the nuclear industry should provide for their own decommissioning but the timescales involved are vast – centuries. Realistically no industry can be committed to this timescale. The Government’s proposals for electricity market reform have effectively introduced new subsidies for nuclear power. Uranium will be exempt from new taxes on fuels used in the generation of electricity thereby creating a subsidy for nuclear power which, by the Government’s own admission, will result in windfall profits for the nuclear industry. Feed-in tariffs with contracts for difference are a direct subsidy for the nuclear industry. These subsidies for nuclear power are harmful in the fight against climate change by diverting resources away from alternatives that are cheaper, quicker to build, more effective in cutting emissions, and with none of the many problems with nuclear power. There are simpler and more effective ways of decarbonising the economy, ensuring the security of energy supplies, and holding costs down.

Energy Fair May 2012 The World Nuclear Industry Status Report Nuclear power in the United Kingdom Anti-nuclear movement in the United Kingdom Energy subsidies Nuclear or Not?

  1. ^ Energy Fair – Who we are, Energy Fair, accessed 2012-01-20
  2. ^ Legal bid to halt nuclear construction, Energy Fair, published 2011-11-07, accessed 2012-01-20
  3. ^ UK ‘subsidising nuclear power unlawfully’ BBC, published 2012-01-20, accessed 2012-01-20
  4. ^ “Complaint about nuclear subsidies may prevent new reactor builds”. Energy and Environmental Management. 24 January 2012.

The nuclear industry’s secret subsidies