Yesterday, I outlined why Labour’s energy policies would be bad for consumers, bad for tackling climate change and risk the lights going out.
However misguided Ed Miliband’s energy policies are there is no doubt that he was seeking to respond to the fact that many consumers are feeling the pinch through rising energy bills. The recent price increases by SSE and British Gas will hit consumers hard and I am afraid there will be more to come.
So what is our response?
By the end of this Parliament we will have put £700 a year back in the pockets of hardworking people by raising the income tax allowance to £10,000. And in the next Parliament we aim to raise the allowance further to the level of the minimum wage, around £12,500. Already, and remarkably, Labour has said they think that is a bad idea.
As we recognised in the Green Growth, Green Jobs policy paper passed at the Glasgow conference, the most effective way both to reduce our greenhouse gas emissions and save consumers money is to improve the energy efficiency and the insulation of our homes. Focussing on energy prices only gives part of the story – what we should be focusing on is energy bills.
The Energy Company Obligation (ECO) which is in the firing line of some energy companies and Tory politicians at the moment is focused on improving the insulation of our homes. To get rid of it might mean that energy prices would go down but energy bills would go up!
Whilst by 2020 policy costs will have added £286 a year to people’s bills, the savings resulting from our energy and climate change policies will amount to £452 – bills will be £166 lower than they would have been.
We have also increased the cold weather payment and introduced the Warm Home Discount of £135 a year for the least well off pensioners and some benefit recipients to help those who will have greatest trouble meeting their energy bills.
But there is also much we can do to ensure that consumers get the lowest price available to them. Liberals believe that competition and consumer choice in markets gets the best result – but that will often mean regulation of the market to ensure that competition and consumer choice can thrive. In contrast Labour’s arbitrary intervention in the market telling the energy companies what their prices should be would be a return to the bad old days of state intervention.
That is why we have focused on boosting competition – more than doubling the share of the energy retail market provided by independent energy suppliers since 2010, with more to come in the next few weeks. We have also encouraged switching, both by individuals who save on average £150 a year if they switch and collective switching through our Cheaper Energy Together initiative building on the excellent work of Liberal Democrat run South Lakeland Council.
To make it easier for consumers to compare one tariff against another we have reduced the often bamboozling array of tariffs so that consumers can be sure that they will be on the lowest tariff according to their preferences.
I know these policies may not be as eye-catching as a 20-month energy price freeze. But they are liberal policies which will be far more effective in reducing household energy bills in the short, medium and long term.
Image: Houses of Parliament from the London Eye at night by David Hawgood under cc2.0.
* Ed Davey is the MP for Kingston & Surbiton and Leader of the Liberal Democrats