What does efficiency mean?
In 1983 Deloitte prepared a report for the department of energy which set out to analyse ‘efficiency’ at the British Gas corporation. This was just over a decade after the 12 regional gas boards had been brought together into a single nationalised body in order to create a more powerful organisation for the management of national infrastructure. The report makes it clear that after four years of Margaret Thatcher’s Conservative government the relationship between the department of Energy and British Gas Corporation was appalling.
In the report Deloitte explain this situation with no reference to politics, it is a remarkable act of euphemistic talking, a real technocratic skill. “We attribute a significant part of these difficulties to the ambiguity concerning BGC’s objectives, since this allows different views to be held about what BGC should be trying to achieve.” In Deloitte’s view the biggest issue here is a lack of agreement about the objective of profit-making, the consultancy says “there is significant ambiguity about the extent to which BGC is expected to maximise profits”.
Whilst in our current context the profit motive may appear to be a matter of common sense for some, even in the context of state run organisations, this was certainly not the case for British Gas prior to the Thatcher government. The 1972 gas act, which created the British Gas corporation, set out the objectives of the organisation quite clearly:
It shall be the duty of the Corporation to develop and maintain an efficient, co-ordinated and economical system of gas supply for Great Britain, and to satisfy, so far as it is economical to do so, all reasonable demands for gas in Great Britain.
The British Gas Corporation, as established under Ted Heath’s Conservative government, was designed to satisfy part of the energy requirements of the country, and not to make a profit. Instead it seems to have been the practice that profit from one sector of the corporation e.g. gas fields, could be used to cross-subsidise unprofitable aspects such as gas safety and managing price levels.
Deloitte appears to have been greatly perturbed by the way that this approach shaped the running of British Gas at this time. One of their recommendations was that the budgeting separate out the sales and marketing of domestic appliances from the sales and marketing of energy. Up until this point British Gas had an effective monopoly not only on energy but on the retail of appliances.
A network of ‘Gas Showrooms’ which had existed for as long as the energy sector had been nationalised, provided advice, sales, and a place to pay your bills. In the early eighties a concerted effort was made by the government to privatise this part of the British Gas Corporation, one of the issues which had led to that break down of relations between government and the corporation. In 1980 the government commissioned a report from the monopolies commission which strongly criticised the status quo.
In 1981 the Minister for consumer affairs announced that the government would sell off the retail concerns of British Gas. This was not a straightforward proposition, and it marked a significant ideological and philosophical shift in the management of British energy provision. Whilst this was presented as an issue of fair trade the reality was more complicated. Anthony Harrison summarises the debate in a 1981 editorial of the journal of the Chartered Institute of Public Finance and Accountancy, Public Money .
Harrison writes “the case for selling off the showrooms rests – and must inevitably rest – on certain general beliefs about the way in which competitive markets operate.” He refers to the fact that the Gas showrooms are not themselves a viable business, they combine servicing, safety, education, marketing, payments, and more. They cannot simply be sequestered from the whole of the corporation without creating lasting impacts. The Deloitte suggestion that the budget be re-organised to better distinguish between the different operations of the corporation appears to be a direct response to these issues, issues which at the time prevented the government from fulfilling their plans.
All of this is interesting to me as it was the scale and interconnectedness of British Gas at the time which seems to have enabled the rapid transition to North Sea Gas during the 1970s. Whilst not at the scale of the current challenge the conversion to North Sea Gas included the co-ordinated adaptation of 30 million appliances, and an entire infrastructure in just over ten years. It was the perceived need for such overarching influence that the corporation was created in 1972.
Viewed from the perspective of the new economics of the new right, British Gas appeared to be ‘inefficient’ and failing. The account of the breakdown in relations between government in British Gas is an existential one. Efficiency in the ’72 act meant that every home should have a supply of energy, under the Thatcher government it meant that British Gas should be turning a profit. Having failed to break up the corporation, or to persuade it that it should re-orient around profit maximisation the government took the approach of throwing the baby out with the bath water and sold off the entirety of British Gas in 1986. In the biggest privatisation up until that point the government surrendered British Gas to the market forces which it had been designed to insulate energy provision from.
The government gave up its ability to control the countries infrastructure. In an act of wild vandalism in the name of ‘efficiency’, and in all likelihood with the true motive of raising funds without raising taxes, the Thatcher government in one fell swoop gave up its ability to directly influence the way that energy was used in Britain. Even Hayek thought that government should have a direct stake in infrastructure.
The Gas Showrooms may seem an insignificant element of this story but they represent a significant missed opportunity. They were a point of contact between the householder and the whole scope of domestic energy provision. Billing, sales, education, servicing, safety, all of these things were accessible through a single organisation in a single place. It strikes me that the successful conversion of household supply to North Sea Gas will have benefited hugely from the fact that British Gas operated a monopoly.
I don’t hold up much hope for nationalisation on this scale! Pity, but even within the practical limits of our current political and economic context the Gas Showroom is a useful model for how decarbonisation might be achieved. For much of the 20th century energy was sold to householders via appliances, this meant that people learned about energy at the same time that they adopted new technologies, it made sense that British Gas had a role in selling appliances because this was one of their main ways to market their services. Maybe induction hobs are a better starting point than heat-pumps or insulation as a way to sell the idea of de-carbonisation as a step towards a full domestic transition.
But who is responsible for selling the technology of the decarbonised home? It seems to me that if there were a place (real or virtual) where one could access genuine advice, sales, billing, and servicing with confidence. And that the people selling to you were not motivated by profit but by the effective provision of energy to your home, it might be useful! But with the utter fragmentation of domestic energy provision, and the added complexity of de-carbonisation, this kind of joined-up communication feels extremely far off.
Its good to dream too… what we really need is the establishment of the equivalent of the British Gas Corporation but for de-carbonisation. A body with power and a stake in all aspects of infrastructure and supply that has in legislation equivalent to that bestowed on British Gas in ’72. Something like:
It shall be the duty of the Corporation to develop and maintain an efficient, co-ordinated and economical de-carbonisation for Great Britain, and to satisfy, so far as it is economical to do so, all reasonable demands for energy in Great Britain.
Just imagine it!