Costs don't go away you know

The collapse of Bulb Energy - largely through not disposing of wholesale price risk to the speculators in The City - is leading to government carrying some rather large costs:

The cost to the taxpayer of running Bulb, the failed energy supplier, could spiral by £1 billion or more as gas prices hit fresh record highs, according to industry estimates.

The point we want to insist upon being that those costs don’t go away simply because someone else - in this case government - owns it. The idiot price cap means that the gap between wholesale and retail prices is there. Someone, somewhere, has to carry those costs.

This principle is of wider application too. George Monbiot was earlier this week wittering about free health care. The NHS isn’t free, it surged through a cost of £150 billion a year some time ago. UK health care is free at the point of use but someone is still carrying that cost.

The Resolution Foundation is today complaining about how social rents are going to rise with inflation. OK, someone, somewhere, is going to carry the costs of housing 5.5 million people. That we might be talking more of opportunity costs - the rent that could be collected rather than the direct cost of housing provision - doesn’t change matters. If we’re not including opportunity costs then whatever it is we might be talking about it’s not economics. Someone, somewhere, is carrying that cost of providing that housing.

We do not solve cost problems by changing the ownership of something. Dumping something on government does not change those costs. We can - and sometimes most certainly should - change whose wallet lightens to cover certain costs but that switch doesn’t change the amount of those costs.

It’s an important point and given current conversations worth recalling. Costs are costs and changing who pays them is not the same thing, at all, as changing the costs themselves. That second is rather more difficult in fact and isn’t something that - unless we desire to increase them often enough - is achieved by nationalising something. As Bulb is showing. That price mismatch between unhedged wholesale and capped retail costs is still there whoever owns or runs the organisation.