Ed Miliband announced in his keynote speech to Labour Party conference that, if elected, he would force energy companies to freeze energy bills for 20 months.
Now obviously, from an economic liberal perspective, this makes no sense.
Freezing energy costs is precisely the wrong way to go about dealing with the cost of living problem in this country. By freezing income while costs rise in the global upturn & the population expands to require greater supply, Miliband is depriving the energy companies of the capital they need to invest in the expansion of the system.
This will inevitably drive the energy supply industry in the UK, in the shape of OFGEM, into pushing for higher subsidies to expand & maintain the energy supply. Those higher subsidies come, of course, from taxpayer money.
So Labour’s plan will cost less on your bill, but more from the Exchequer, from your taxes. It’s a classic statist solution which hides the real cost to people where they can’t see it. It’s bad and deeply illiberal, both personally & economically.
It also puts the energy industry back into a higher dependency upon the government. Ed Miliband clearly wasn’t joking when he said he wanted to bring socialism back to the UK!
However, although these are both very desirable effects for Labour, this isn’t the really cunning part.
In announcing this 18 months before the next general election, Labour aims to worry the energy companies into a pre-emptive price hike. If the energy suppliers see a price freeze coming, they will inevitably seek to mitigate the risk by raising prices ahead of time.
This then gives Labour the justification to exclaim, with horror, “Look at these price rises. That nasty coalition is doing terribly on the cost of living!”
Thus the entire exercise becomes a self-fulfilling prophecy.
So, their plan is awful economics but very good politics. It takes skill to come up with a plan which hurts the very people you claim to be helping, blame the other side and bring both customers and providers under closer state control. Some might call that cynical.
The Liberal way to deal with the cost of energy supplies is longer & more complex, but will work a lot better. It will actually bring down costs.
Firstly, it’s to let prices go where they will. This sounds harsh, but is essential to the success if the second part.
The second part is to remove tax from all forms of energy saving home improvements, and offer the Landlords of rented accommodation tax incentives to install them.
There are also arguments to be made in favour of tying the repayments of such improvements into the house, rather than to the owner of the time, on a manner that has links to the inherent property value increase of a more energy efficient property.
That is a much more sustainable solution to the problem, not a quick fix for electoral gain.
* Alisdair Calder McGregor is a member of the party's Federal International Relations Committee.
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84 Comments
Between the writing of this piece & LDV publishing it, the energy companies have indeed begun to look at price increases before the 2015 general election.
Predictable, indeed
The press reported 4 days ago that British Gas intends to increase prices by 10% this autumn, and of course all the others will without doubt be “regretfully” forced to follow suit.
Mr. Miliband’s proposal may well have been a piece of political theatre intended to maximize the political benefit of that impending price rise, but this country has a serious problem with fuel poverty, and I do not recognize “letting prices go where they will” as “the Liberal way” to deal with this, although I completely agree with your comment about the need to make it cheaper to improve home insulation.
The trouble is Paul, that keeping prices artificially low is a disincentive to energy efficiency upgrades.
In order for this proposal to work financially, without harming investment in electricity infrastructure, it is probably going to have to turn into a good, old-fashioned subsidy! So we will end up paying the increases through taxes.
“The Liberal way to deal with the cost of energy supplies is ………….. to let prices go where they will.” Meanwhile you hold down wages of State employees and urge pay restraint in other areas of business (excluding directors of course). This sounds very Thatcherite and vote-losing to me.
a) energy saving improvements done under the Green Deal ARE tied to the house not the owner (via the fuel bills)
b) describing an undeliverable promise as excellent politics is why so many people are turned off by politics. It is BAD politics, because it undermines those of us who are trying to do it right.
Alisdair is right that energy efficiency is the long term solution – but the uncomfortable truth for the coalition is the gap between the hugely overblown claims made for the Green Deal and it’s actual performance make it very hard for them to claim they are doing the right thing.
It’s almost cruel to remind people, but vital background that Chris Huhne said in 2010 that the Green Deal would be “a revolution…the most ambitious energy-saving plan ever put forward. A once-and-for-all refit that will make every home in Britain ready for a low-carbon future. No more half-measures going off at half-cock.”
Unless the LibDems come up with something much, much better for the next election Labour will find it easy to head off claims energy efficiency being more important by simply pointing at the coalition’s record. But get it right and instead of “Bill Freeze for 2 years” headlines, you can have “Bills cut permanently”. The challenge is there to be taken.
The Liberal way to deal with the cost of energy supplies is longer & more complex, but will work a lot better. It will actually bring down costs.
Firstly, it’s to let prices go where they will. This sounds harsh, but is essential to the success if the second part.
The second part is to remove tax from all forms of energy saving home improvements, and offer the Landlords of rented accommodation tax incentives to install them.
You think the solution is to let energy prices shoot up, then offer tax breaks to private enterprise.
How popular do you think any party that advocates increased bills for households and increased profits for business is going to be?
Popular enough to actually introduce these policies?
Simon;
A) You’re right, but I don’t think there’s enough impetus for Landlords to be upgrading, and fuel poverty disproportionately affects renters.
B) My original headline said that it was “excellent politics for Labour”. I blame the subeditor for the changes! You’re right in many ways, but it is politically astute of Labour to come up with an announcement that makes the problem they are complaining about *worse*, sets out a reason to vote for them (flawed as it may be) and advances the socialist agenda Miliband has set out.
Martyn;
I’m all ears for any suggestions. As I’ve said, I think the key is to remove the tax burden from improvements & motivate landlords to improve rented properties.
After reading Ed Miliband’s letter to the energy companies this morning, one thing is very striking; under a potential post-2015 Labour govt, PM Miliband would seek mass liberalisation of the energy market – maximum competition and transparency. Ed believes it will take two years to establish a true free market, which is why (he feels) price control is needed for 20 months.
Of course, his price control will create massive short term chaos and disruption in the energy supply, but it is worth noting he is deliberately using socialist rhetoric to sell a potential controversial policy to Labour activists.
“use it or lose it” is no different from the Coalitions or the Mayor of London’s plan for liberalisation of planning laws in the United Kingdom.
Ed Miliband is following in the footsteps of Labour’s Swedish sister party.
I would not say ‘let prices go where they will’, but I would say ‘ensure that there is a competitive market for energy’. Competitive markets deliver goods at the best prices, and that is just a fact. Uncompetitive markets, whether they are due to price controls, or cartels, or for some other reason, lead to high prices and windfall profits, or shortages, or (probably if Ed gets his way) both.
Now Labour sources are also talking about looking again at the energy markets and revamping the regulator, and there may well be some merit in this. Unfortunately now they’ve shown their hand as price fixers, industry will not trust Labour to reform the regulator, and this means that they will not invest if they fear a Labour government.
Or that they will not invest without higher guaranteed prices. This the unspoken tragedy. The more politicians frighten the horses with talk of being tough, the more insurance investors will need before they will build any power stations. And that means higher prices.
Of course many will throw their hands up at this, give up on the markets, and decide the state should build power stations. But I think we are still some way from energy bills being as high as they would be under that model.
I am in agreement with large chunks of this article apart from the somewhat partisan, name-calling tone. Yes, Miliband’s talk of bringing back socialism has given the Tories and the tabloid press a stick to beat him with, but let’s let them use it, rather than stooping to their level, OK?
“So Labour’s plan will cost less on your bill, but more from the Exchequer, from your taxes. It’s a classic statist solution which hides the real cost to people where they can’t see it. It’s bad and deeply illiberal, both personally & economically.”
However, if there is a fairer tax solution, it could also be considered redistributive. To play devil’s advoctate: energy price hikes have been proven to hit harder on the poor, the isolated, the vulnerable; there is only so far you can go with voluntary schemes and winter fuel alllowances. Capping costs and recouping the extra out of a tax system intended to draw more out of deeper pockets could be seen by those on the Left inside both Labour and the Lib Dems as a reasonable response to this problem if other solutions have been proved unworkable.
I do accept the strong basis of the proposal to remove tax from all forms of energy saving home improvements; this is a classic Liberal approach to indirect taxation; that taxation should removed from the goods that will do the population the most good. But let’s not create a version of liberalism where all intervention by the state is decried as an evil; that is against the British tradition which has long been open to fuitfully combining solutions from both ‘Left’ and ‘Right’ of the ideological divide as circumstances require.
Sorry, ‘solution’ in third para should be ‘system’.
I should qualify what I said about reforming the energy market. The other problem with this call for reform is that there is a great deal of reform in progress. Capacity markets, contracts for difference, collective switching, smart meters, simpler tariffs/bills, etc. Ed may have a point about the energy market as it was in 2010, but will that still apply in 2015? I don’t think he knows or cares. He wants to tear it all up again just to be seen do be doing something, creating uncertainty and damaging investment.
It makes excellent economics and excellent politics if the public agreed with it. Now, taking this policy in isolation, the public probably do agree with it, but will the public agree with the Labour Party manifesto in 2015? I don’t think they will.
I’m absolutely seething at Ed Miliband’s plan for energy markets – but hey, I clearly can’t be trusted to comment because I work (in a lowly capacity!) for an energy company.
This is the culmination of years of political illiteracy on energy from all parties – but especially Labour – whereblaming those nasty energy companies becomes an easy and populist scapegoat for rising energy costs.
First, those energy costs – somthing like 85% of a typical hosehold bill is out of the control of the energy company delivering that bill. Wholesale energy costs, regulated network costs and exceptionally high taxes and levies make up the bulk of the bill. The remaining 15% accounts for overheads and profit margin of typically 4-6%, hardly massive given the risky nature of the industry. But the energy company has itsname on the bill – so is blamed for the 100%, including the 15% they can control and the 85% they can’t.
Alisdair Calder McGregor is absolutely right that this won’t in fact reduce the cost to the consumer. The most likely result is that it won’t be the energy company shareholders who will lose out but their investment plans will be cut back, to protect themselves from the risk of wholesale price rises that can’t be billed on. These are the long term investments that the country needs to keep the lights on and keep bills down over the longer term.
@Alisdair – there is a world of difference between keeping prices artificially low, and preventing price gouging through the operation of a de facto cartel.
What really annoyed me about Ed’s plan was not so much the price fix for 20 months – which the energy companies will suck up by putting prices up beforehand and/or scaling back their investment plans to cope. At least this is just a temporary measure.
What annoyed me was first, his plan to break up the energy companies by splitting their domestic “downstream” arms from their energy sourcing “upstream” arms. It’s this vertical integration that allows energy companies to absorb wholesale price rises (and contrary to popular myth, they do) and hedge against wholesale price falls. When wholesale prices go up, typically the upstream bit of the company will make more money and the downstream (customer facing) bit will make less. And vice versa when prices go down. By removing this hedge, energy companies will be more exposed to wholesale price fluctuations (and boy, they do fluctuate) and this will be felt in both their borrowing costs and return expected by shareholders (to compensate for the higher risk) – and in turn, in customer bills.
To cap it all, he then says he will abolish the Energy Company Obligation (ECO) scheme. Finally, something that energy companies might like from his speech – but not in a good way. ECO involves 3 separate obligations which will collectively improve insulation of the UK housing stock – substantially at the cost of the energy companies (to the tune of about £4-£5 billion between now and 2015). Why on earth does he want to abolish it?
To those saying that we need a review into the competitiveness or otherwise of the energy market in the UK, I don’t suppose you will believe me but there have been countless reviews over the last few years into exactly this. They’ve been well trailed in the press before they happen and never reported when they report – because they have all concluded that the market is extremely competitive.
@ Martyn
Re the Green Deal – yes it has been a flop. Sadly the underlying idea is a good one but it’s been killed by cost and complexity from DECC. The simple version of the Green Deal – where customers get cashback for improvements – has actually worked OK. But the finance loans are too complex for the customer and too risky for the energy company.
Or we could carry on as we are, let costs spiral and have the lights go out anyway. Adam Smith warned about the dangers of the kind of thing we are seeing in the energy market and for that matter rail and will soon see with the the Royal Mail.
“Firstly, it’s to let prices go where they will. This sounds harsh, but is essential to the success if the second part.
The second part is to remove tax from all forms of energy saving home improvements, and offer the Landlords of rented accommodation tax incentives to install them.”
That makes a great deal of sense {NOT}
So what happen to the home owners, who are already struggling to meet the rising costs of living and energy prices? And you say give the energy companies free reigns to go at will to increasing prices further.
What happens to people living in social housing who are struggling with rising energy costs? Don’t think the councils are going to pump millions more money into making all their properties more energy efficient, they haven’t the resources due to the cuts from central government. And even if they did, any home improvements they make, they shove the costs of rents up.
It is ludicrous to say let energy companies go where they will with prices. It is the poor man at the bottom who always gets stung.
There was a time when the Liberal Democrats used to be on the side of those at the bottom, what happened to that party?
Only 21% of Voters believe that Labour will hold down Energy Prices, that a lot fewer than actually voted for them in 2010. That suggests that its not good Politics either.
Whatever next. I wont be surprised to see Liberal Democrats campaigning to have Margret Thatchers Head put on the £50 note. Probably on the 1 penny piece as well just to remind the poor they can’t escape Thatcherism or the Tories
Alisdair
I don’t think removing tax burdens goes nearly far enough. Insulation prices have been low for years and the Green Deal removes any up-front costs at all. Despite the obvious attraction of using less energy and so spending less, the obstacles remain larger than the incentives.
The LibDems have taken an important first step – which is to recognise upgrading our housing stock cannot be done for free, and making a commitment in the recent Zero Carbon paper to use ETS/Carbon Floor Price receipts as a stable resource to fund this vital infrastructure improvement. This is important as I’m sceptical any programme without significant funding will fail. Developing the programme must come next.
Matt;
You obviously haven’t read the point I made about indenturing the cost to either energy bills or the property, nor the comments of other people in this thread on the Green Deal and similar schemes.
Let me ask you this: if prices are held down, is there any motivation for people to make their homes more energy efficient?
Let me ask you this: if prices are held down, is there any motivation for people to make their homes more energy efficient?
What about people who rent? How can they persuade their landlords to invest in energy efficiency when there is no cost to them of not doing so?
What about those who can’t afford to make their homes energy efficient?
What about increased costs to businesses of higher energy prices? Many may not be able to afford them, or afford to invest in energy efficiency. What happens when these go out of business?
@Alisdair Calder McGregor
I did read your comments
Scheme’s like the Green Deal do still cost you money {in installments through your energy bills} people are struggling with energy bills as it is and your suggestion is t o
a) allow energy companies to charge what they want at will
and
b) For people to incur higher monthly energy costs to pay for it.
The Savings you do make through lower usage, would be snapped back up and then some by Energy companies for ever increasing their prices.
I would also like to remind you that councils have still not even got round to installing every council home with “double glazing windows” So they are not going to get round to making every council home more energy efficient any time soon.
Just for clarity, I am not arguing that Labours policy announcement is necessarily the right policy. I am though arguing against your point that Energy companies should be given a free reign to let prices go where they will.
Alasdair: “Let me ask you this: if prices are held down, is there any motivation for people to make their homes more energy efficient?”
We have the very real example of the effect rising petrol prices has had on the numbers of smaller-engined, more energy efficienct, hybrid and electric cars being sold.
We live on a planet where more and more people want more and more things that consume energy. We have to find some way to tackle that and holding prices down is not one of them. Encouraging investment in energy efficiency is one of them, and the price mechanism is a great motivator for that.
An energy price freeze imposed by the Government on the energy companies can only work if the cost of energy is going down rather than up (in which case we wouldnt actually need the freeze in the first place). The alternative is that the Government subsidises the cost of the energy supply in order to pay for the freeze, and that means an increase in the national debt and the deficit.
Ed Milliband talks of making the enegy market more competitive, but unless there is a surplus of energy production (and that is really not going to happen) there can never be real competition in the energy market unless we remove all incentives and restrictions. The only possible outcome would be to move back to burning coal, without carbon capture, and that would completely destroy any attempts to tackle global warming.
Ed Milliband is clearly not just thinking outside the box, his thinking is totally off the planet.
Daniel Furr
under a potential post-2015 Labour govt, PM Miliband would seek mass liberalisation of the energy market – maximum competition and transparency. Ed believes it will take two years to establish a true free market, which is why (he feels) price control is needed for 20 months.
It ought to be very obvious that this will not work. Free market obsessives really need to realise this. The vast majority of people don’t have the time or inclination to be forever researching into options and making a rational choice based on careful calculation of the exact economics behind it. We already have this free market approach, and all it actually means is one is forever getting interrupted by gabby salesmen burbling incomprehensible nonsense trying to get you to switch from one supplier to another. I just DON’T WANT MY TIME WASTED IN THIS WAY? Ok? Have you free market maniacs got it? I have better things to do with my time than spend it wheeler-dealing on this or any other such boring thing. What I actually want is to be able to go to whatever is the nearest place that supplies what I need and be sure that what is supplied will be at a reasonable cost with reasonable backup service. If you maniacs expect me to spend hours comparing one against another, you are robbing me of my time and freedom in expecting me to do this. It used to be the case that I had people who I chose to do that job for me, they were called politicians, I wish it still was like that – and that’s what I say when I slam the door in the face of yet another gabby salesman giving me the patter.
Sure, with some products it’s nice to have a choice, and to look round and pick what you like. That doesn’t apply to gas, or electricity or water – it’s all the same coming out the tap. It actually doesn’t apply to health care either, I’m not a medical expert so how can I tell what’s best? There’s no fun in shopping around to find who’s going to do the best job at some health care thing I need even if I could be bothered to do the research to find out a bit more about it.
We can see it doesn’t work well with financial products either. If it did work, we would not have all these mis-selling scandals because by free market theory these poor quality products would never have got anywhere. The reality, however, is that most people are pretty clueless on these things, and so are easily misled by sales patter. Actually, you know, I’m not as clueless as I’ve made out above – so when I do argue with the sales patter people I often find I know more about their product than they do. The reality is to be a good salesperson you’ve got to be a bit intellectually weak yourself, and so be the first victim of the patter passed on to you by the higher level salespersons who hired you.
I live in Don Foster’s constituency in Bath, we have further problems on the housing strategy, and the need to get out of the mess we are in.
I say thanks to Ed Miliband for highlighting the awful fuel poverty, and I highlight the problems with some of the Social Housing Stock. Georgian, no insulation, no cavity walls, and bills that go through the roof.
I hate the winter, when I have ice on the inside of my single glazed windows, my wall to the back of the property is single cavity and around 7 inches think in old money. I dislike wasting money I do not have, nearly half of heat goes through the wall and windows. The mould starts to grow.
I am 65 years old and long to be warm, is that something we should all expect, or only those who have the better properties in Social Housing?
I thought society was meant to be equal.
Helen Dudden – Georgian housing in Bath is highly desirable. What is highighted is the need to sympathetically update properties (eg by secondary glazging), not some dubious strategy to freeze energy prices.
Alisdair, you beat me to it by a good three hours!
Here’s my two-penneth:
http://millenniumelephant.blogspot.co.uk/2013/09/day-4650-mr-ed-is-mr-freeze-just-dont.html
Broadly similar point (political genius; economic madness) but with different details along the way 🙂
@matt “What happens to people living in social housing who are struggling with rising energy costs? Don’t think the councils are going to pump millions more money into making all their properties more energy efficient, they haven’t the resources due to the cuts from central government.”
Given that it is the Coalition that has got rid of the reverse subsidy a lot of councils now have a lot of capital money to spend improving housing stock. Lambeth where I live for example is getting the better part of £200 million for much needed work on it’s housing stock. In stark contrast to 13 years of delay from the last Labour government.
I am not sure that:
Firstly, it’s to let prices go where they will. This sounds harsh, but is essential to the success if the second part.
The second part is to remove tax from all forms of energy saving home improvements, and offer the Landlords of rented accommodation tax incentives to install them.
is a liberal solution. Also we are wanting liberal AND social democratic solutions. Which surly would be:
1) Clear up energy pricing so that you can accuratly see the prices (i.e. force it to be £/kwh with peak and off-peak options). This lets the consumer side of the market regulate the price better.
2) Determine a set amount of kwh per household or person which are VAT free (after all is VAT not a tax on luxuries, which energy is not).
3) Then remove tax from energy saving products and encourge/expand green deal.
4) Perhaps financial penalties to encourage landlords to install energy saving systems, lets not give more money away.
It’s inaccurate to say the Green Deal has failed. The number of assessments has stalled during July and August (it being the summer holiday period and fewer people are both at home and thinking about their heating bills), but the number of ECO installations continues to grow rapidly, as does the number of qualified assessors and authorised installers.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/244349/statistical_release_green_deal_eco_great_britain.pdf
This is something I believe we can all promote to great effect in our campaigning. Encourage the people in your wards to get their houses, rented or not, assessed.
btw, I had an assessment and my loft insulation topped up under the ECO scheme as a private tenant and my landlord has given his approval for any additional work so I am chasing a boiler replacement. Tenants need to ask their landlords to allow it, and very few will say no as they get their properties improved at no cost to themselves.
@ Simon Oliver
Green Deal and ECO are not the same thing. The government intended them to work together but in fact the links just aren’t there for a variety of reasons – mainly the exceptionally tough ECO targets combined with commercial reality. ECO has been a success – in that the energy companies are working hard towards the targets, because there’s a massive stick in terms of fines if they don’t. Green Deal assessments work for ECO or Green Deal – but mmost of the GD assessments apart from ECO are for cashback, meant to be only an initial incentive from the government to get GD up and running. The actual GD plans (where the cost of any work goes on your energy bill) are failing – as per your link, only 677 are currently in the pipeline and of these only 12 were live.
I’m astonished that many of you feel that its okay to allow these once public owned companies to continue to punish consumers every year with inflation busting increases whilst pushing millions of consumers into further fuel poverty; its getting to the point whereby gas and electricity is no longer a necessity of life but a luxury and it should never have been allowed to reach this point; good on EdM for taking the first steps towards much needed reform.
Let prices go where they will ! I’m guessing the person that typed this line can afford to put his central heating on a timer so his tootsies don’t feel the winter chill.
7 billion was paid in dividends last year to those that could afford to benefit from the great sale, i do hope Sid got the message, if we are truely all in it together then maybe let the fortunate ones take a dividend sabbatical.
Like Helen Dudden I long to be warm in winter, unlike her I do live in social housing which has deep loft insulation, double glazed windows and door, new central heating and cavity wall insulation.
So why am I so cold? Four winters ago I was actually in credit with my gas company, by the end of the first quarter of the next year I was over £350 in debt. It took me 6 months to pay the debt and so when the gas company decided to put their prices up even further I decided not to put on my heating. Apart from when I have had visitors I haven’t had it on since.
So for people in my situation smart meters, simplified tariffs etc are just so much froth. Prices are too high and many of us will not be able to heat our houses next winter. Labours new policy may not allow me to put my heating on but it may provide protection for those teetering on the edge.
I find it hard to understand those on here arguing against Labours proposals. Surely we as a party are all about protecting the vulnerable. This policy is a step on the path towards that protection
@Matthew Huntbach (1:13pm):
The vast majority of people don’t have the time or inclination to be forever researching into options and making a rational choice based on careful calculation of the exact economics behind it… What I actually want is to be able to go to whatever is the nearest place that supplies what I need and be sure that what is supplied will be at a reasonable cost with reasonable backup service.
Absolutely. Just look at what happened to Directory Enquiries – who has actually benefited from the liberalisation of this service?
@Martin Lowe – actually it’s even worse than that. You can look at a variety of tariffs and use a “careful calculation of the exact economics” but increasingly we are being offered the choice between a fixed-rate lasting some number of years (at a high price by today’s variable tariff) versus some flavour of floating tariff. In effect, the energy companies are inviting their customers to become commodity speculators, trying their hand at the roulette wheel of international finance and global weather forecasting.
Typical lib dems. Screw the poor and help the landlords…
“The Liberal way to deal with the cost of energy supplies is longer & more complex, but will work a lot better.”
This is a liberal way, an economic liberal way. This way is not concerned with suffering now, it’s purer than that.
“Firstly, it’s to let prices go where they will. This sounds harsh, but is essential to the success if the second part.”
Exactly. Let the cost of Gas go up by 37% and Electricity by 17% – if some people can’t afford it and have to turn their heating off over the winter, it’s a price worth paying in the long run.
“The second part is to remove tax from all forms of energy saving home improvements, and offer the Landlords of rented accommodation tax incentives to install them.”
Key word: incentives.
Lets hope the ethical landlords see sense and make the most of the inducements. Rogue Landlords or those who can’t be bothered to upgrade their tenants’ flats/homes until they really have to – well lets hope they get around to it – eventually.
Sorry but this is not good enough. There is no humanity in this approach.
Miliband has struck a chord because it chimes with real life experience. Liberal Democrats used to understand this. I know that many still do but it’s frightening that some Lib Dems would actually prefer to sound like Tories (with a bit of a green conscience) than be actively and socially concerned with people’s lives.
Umm, aren’t the Lib Dems forever telling us that they are taking steps to reduce energy bills for consumers?
If the Lib Dems are successful in that, won’t that cause all the same problems described in this article?
Or does the author think that the Lib Dems’ plans won’t really benefit many people, hence there will be no bad consequences?
“Miliband has struck a chord because it chimes with real life experience.”
I agree, but that doesn’t mean he’s right. He’s come up with a populist, simplistic but ultimately counter-productive policy which is based on a fundamental misunderstanding of the energy market and basic facts. Sorry to say that I think this puts him in the same league as the Nigel Farages of this world who also stike a chord with people with populist, simplistic but ultimately flawed solutions to complex problems.
@Tabman, they may be very costly and so -called desirable , but they most certainly leave, a large carbon footprint.
I feel what Ed Miliband is doing, is something that should be done. Energy prices rising again, and this freeze is to last for the specified time, as reported.
Thanks to this Government we have “food Banks”, “affordable rents” and the need to feed children. It is no good trying to get reason into this web page.
@ Julian Tisi: “Sorry to say that I think this puts him in the same league as the Nigel Farages of this world who also stike a chord with people with populist, simplistic but ultimately flawed solutions to complex problems.”
If Miliband manages to cream off half the Lib Dem 2010 vote, that will be enough to win the election, and with a majority. So for him, it is a risk worth taking. It may have downsides but so does the offering of pain now – gain later in the article above.
That kind of liberal-economic argument come across as out of touch with real lives and the difficulties people have in heating their homes and feeding their families.
Of course, the energy companies are jumping up and down. So is Digby Jones , the big businessman’s friend- with great predictability.
The potential flaw is that prices go up enormously before the election, only to be frozen. However, I think it’s really about which side blinks first . If the energy companies hike the prices before an election, it will look politically motivated.
This policy is going to be popular with consumers, and they vote.
I don’t think Miliband’s half-way house state control approach is going to work. He is going to have to be prepared for the state to start building power plants because that will be all that will be left once he scares off big business.
A half-way house state control approach could work with someone like Tony Blair or Nick Clegg, who business could be confident with, but with Ed Miliband’s Labour they will be worried about how anti-business they are going to get, so will probably not bother. They’ve smelt the socialist cheese and they don’t have the appetite for it.
Interestingly, as reported earlier this month, Scottish Power, EDF and other companies are happy to offer fixed rate tariffs which would extend to some 18 – 20 months after the next general election (http://www.telegraph.co.uk/finance/personalfinance/consumertips/household-bills/10280844/Energy-bills-are-rising-but-now-you-can-fix-until-2017.html).
@Helen Tedcastle
You may be right that this might win votes for Labour. But a lot depends on whether or not people believe Miliband when he suggests that high energy prices are all down to those nasty profiteering energy companies. I suspect this could unravel for Labour. It isn’t just energy companies and the government opposing this – industry experts are too.
In a way I think this makes things a lot clearer now come the election. We have Labour offering simplistic, populist solutions which will actually damage the economy – in the same way that Nigel Farage does to the right on the EU and immigration. Some will fall for these simplistic solutions but others will see through them.
@ Julian
Considering the size of this island we occupy and the discounting of development costs, investments, hefty management salaries and probably reserves these companies still managed to pay £7 billion in share dividends……..7 Billion !
You are obviously concerned about your position and that of your co-workers but did you afford the same consideration to those in the public sector who where disposed of? Welcome to the party.
Julian Tisi: “We have Labour offering simplistic, populist solutions which will actually damage the economy ” So if labour’s policy is populist and simplistic, the same has to be true for Cameron, who wants to force energy companies to offer the lowest tariffs: http://www.telegraph.co.uk/finance/personalfinance/consumertips/household-bills/9616124/Millions-to-see-energy-bills-fall-after-David-Cameron-promises-tariff-reform.html
Why? Because prices are way too high.
” It isn’t just energy companies and the government opposing this – industry experts are too.”
Who are these experts and who funds them?
>Because prices are way too high.
Are they? or is this just a false perception because they were previously much cheaper?
Or this just the addict complaining because they can no longer afford their fix?
There is only one way for energy prices to go and that’s up, the only question is how fast.
I like the Scottish Power advert that appeared after I posted: “Fix your energy prices today until January 2017” ie. for 20 months after the 2015 election. A quick look indicates the prices are a 4.6% premium on their current standard rate. So I suspect that many of the companies will argue that consumers who wanted, have the opportunity to fix their energy prices.
Obvious problem with repetition in many parallel threads on energy pricing (it’ll be a bit embarrassing to look at the Recent Comments list), but I think that a few years back (2008/9?), Vince Cable also called for a cap on energy price rises and a referral to the Competition Commission.
@ Julian Dean
“You are obviously concerned about your position and that of your co-workers”
You got me. Correct. As I made clear at the start I’m not an impartial observer. But that’s rather a lot of people who either work for us or whose jobs depend on us. And we’ve hardly been immune from cuts. Rising energy prices have resulted in us having to slim down enormously – there’ve been redundancies (and lots of them) almost each year since I started about 10 years ago, particularly in back office functions (where I work).
@ Helen Tedcastle
“Who are these experts and who funds them?”
I haven’t done any extensive research here but a lot of the people who’ve commented already are not in the energy industry or funded by the energy industry: http://www.bbc.co.uk/news/uk-politics-24275114
http://www.bbc.co.uk/news/uk-politics-24277925
The major problem is that energy companies will increase their prices massively before the 2015 election ‘just in case Labour win’. So now, whichever party or parties get in there will be a hike in energy prices just before the election. This will not help people with the cost of living – which is what Labour say they are all about!
Tracy
Well if they do that it shoes that the market is rigged doesn’t it – how can they all increase at the same time without being seen as a cartel.
This type of argument makes my blood boil – if this is how we accept our critical services be run, at the whim of 6 large comanies (some owned by foreign Governments)? If the unions threatened this imagine the outcry!
It again shows how far the morals of your party have fallen to use this argument and accept is as given. Labour fell into this trap – perhaps they may be now trying to claw their way out of it – we will see.
It also perhaps reinforces the view that energy generation and supply should be controlled by the Government – now that would be a radical, and socialist, policy. Pity s that your Tory friends so botched the privatisation that it is impossible – remember Sid and all those small shareholders lol
To my mind the big mistake Ed Milliband has made is not that he has promised action to stop energy companies from greedily profiteering but that he has made an absolute pledge (to freeze energy prices for 2 years no matter what happens in world markets) which is almost certainly undeliverable in practice. Tuition fees anyone?
@Tracy “Freezing energy prices will not work because the big six will ramp up prices in advance, critics cry. Perhaps they should have been at the Labour conference, as I was. Then they would know that Labour will take powers to base the frozen price on a time period of their choosing, not the companies’. ”
http://www.theguardian.com/environment/damian-carrington-blog/2013/sep/25/energy-energy
We have elderly and disabled people who cannot afford to heat their homes. We have parents choosing between feeding their children and keeping them warm in the winter. The fact that we are one of the richest nations on the planet and so many people are in fuel poverty is disgraceful. And yet we see these energy companies making record profits and paying themselves obscene bonuses. And then they have the cheek to hold the nation to ransom, while Tories and LibDems line up to defend these robber barons. We have LibDems telling us “let the prices go where they will”. Unbelievable and, once again, shows how disconnected this party is from most people. These companies are nothing more than a cartel who are happy to squeeze as much out of the public as possible. This isn’t like TVs or mobiles – energy is a necessity. They have a captive market. There is a lot of anger out there at these profiteering “companies” and for LibDems to do nothing but sneer at Labour and say “let prices go where they will” is more proof, if ever it was needed, of the disconnect between this party and the vulnerable members of society as well as those on low-to-medium wages.
@Julian Tisi:
And we’ve hardly been immune from cuts. Rising energy prices have resulted in us having to slim down enormously – there’ve been redundancies (and lots of them) almost each year since I started about 10 years ago, particularly in back office functions (where I work).
Funny, then, that their profits have continued to be at record levels (well into the £Billions). Bonuses paid to bosses and dividends paid out are at staggering levels as well. So rising energy prices have certainly been good for a certain group of people. Yet you say they’ve been cutting staff and making all kinds of other savings. So it’s not just the British public these cartels are fleecing, but they’re taking their own employees for a ride as well. I’m sure you’re opinion on these wonderful companies will change when it’s your turn to be made redundant while your bosses get, yet again, record bonuses. Stockholm syndrome? 😉
I totally agree with the above post. I am going to a meeting on Saturday on the subject of “food banks” and I feel it is time, that this Party excepted it ‘s part in the falling of living standards.
I don’t put my heating on until I can’t stand the cold any longer, I have gone to bed. I am 65 years of age and live in a property not suitable, because there has been nothing else. There is no insulation in my 300 year old flat.
Children are being feed by these banks, even needing to supply personal items for their mothers, not even that is affordable.
What else can be said? Is this the correct way we treat others?
I welcome Ed Miliband and his ideas. Incidentally, Ed, I am cold and feed up with how I live, scared of the high bills as they mount up, I know that I am not the only one.
Austerity, is painful to those who already just about cope with the high cost of living.
If anyone says lets blame Labour, then come and spend time in my shoes, it becomes very unpleasant when the windows are covered in ice on the inside.
@Simon Bamonte
I think you need to rethink your statement. I suggest you take a look at the profits made per customer rather than just comment on the abstract profit figure that is being banded around.
For 2012 this works out to about profit £138 per customer (£3.74bn net total profits of the ‘big six’ / 27m homes and businesses). Given Ofgem figures show that a typical dual fuel bill bill is £1420, then £138 represents a margin (per customer) of about 10%, which many would regard as reasonable.
I seem to remember that one of the reasons why Ofgem has been favourable to the utilities and allowed them to regrow their profit margins was so that they would have more money available to invest in the new generating capacity we need.
Helen, Simon, Matt
Well said. I’m shocked that Liberal Democrats think its ok for prices to rise endlessly while at the same time there has been an explosion in the number of people needing food banks because their income is insufficient to feed themselves. Its almost as though the poor & needy no longer matter – wouldn’t surprise me to hear that from a tory but never expected such an implication from a LD.
Im glad EM has forced this debate – it’s certainly showing how the weak are ignored in order to pander to the strong.
As several people have pointed out here, the issue of pricing of energy and fuel is not so much an issue in isolation, as one that is directly linked in the mind of the public to the price of food and to wages. Previously, when there were concerns about energy costs, food costs were lower and wafes were rising (or perceived to be likely to rise). Now we have what we might usefully term a ‘triple lock’ on households. If we don’t agree with Labour’s solutions to this issue, what solutions do Libdems have; are they achievable (and with whom as a partner might we achieve them) and will the public recognise them as potentiallty achieveable and effective?
I see that the Lib Dems have nothing, that can better the ideas of Ed Miliband.
If you suggest anything on this site, it simply is not listened too. The Lib Dems have lost contact with those who voted for them. I was a member for about 20 years, no longer am I part of something that is indifferent to those who are finding life so difficult.
There another subject sometime ago, on children and law, simply not interested.
I think that it is understood the situation this Party has placed themselves in, a very sad situation.
@Roland:
I will most certainly not rethink my statement. In fact, your figures prove to me that I am being fleeced by these companies. If a company is making £138 a year or a 10% profit on me, when I cannot even afford to keep my heating on when I want or need to keep it on, I personally feel that is an outrageous amount of profit. Power is not like televisions or nice mobile phones, it is a requirement for life in the cold winter months. These cartels have a captive market and they know it. They are holding us to ransom. If these profiteering companies only made, say, 5% profit off of me, they would still be raking it in and able to continue giving out their lavish bonuses.
Maybe you don’t have to personally worry about the cost of heating yourself, but it is a smack in the face to millions of people like me who cannot afford the heating we need when their profits are not only at record levels, but they are paying massive bonuses and dividends while millions of people freeze.
The LibDems used to stand up for vulnerable people and those on lower incomes such as myself. Now you defend greed and say “let prices go where they will” without even realising these are people’s lives you’re talking about. This party has nothing to offer us on this issue apart from sneers at Miliband and a general disregard for everyone in fuel poverty.
I truly get the feeling that this party is now one filled with well-off people who have no idea how those on lower incomes live. Sorry, but I am being taken for a ride by these companies and I am sick of it.
Lib Dems used to do a lot of things, they no longer do. Why do you think, people like myself have walked away?
I don’t have a strong stomach to read about what they have agreed too, and are part of.
Everything from law, to benefits, to housing, to living costs, the Lib Dems have agreed and supported.
@Helen Dudden
What is your proposal for change? The electricity companies buy energy from Russia. So Labour can jump up and down about the price but will that influence Putin? Why should it?
My proposal is the state should buy one of the big 6 and should compete with the remaining 5. Then let customers decide via switching. But dont lets have this state owned supplier be run by an old Tory duffer. If the other 5 are taking the mickey they will lose customers. If its true that state owned entities are less efficient, then the remaining 5 have nothing to worry about. If its illegal under competition law or EU law, change the law.
I dont understand why Ed Milliband’s plan is thought to have any merit. If the big 6 are profiteering, they should be cutting prices not freezing prices and baking in their margins. Seems to be economic muppetry of the highest order.
@Simon Bamonte
So I take it that you are avoiding the supermarkets? as these are making more than 5% profit from their customers…
“Power is not like televisions or nice mobile phones”, agree, the profit margin on these (like clothes) is typically much much higher…
What I find odd is that you rally against the power companies 10% profit, when the various levies imposed by the government currently account for about 20% of your energy bill and by 2020 are estimated to account for 33% of the bill…
I went to see about “food banks ” today. For three days people are fed.
Children lined up to be fed, one of those present said this is like a war situation, do they mean like a real war? Or is this simply a war against those who have little in this world.
Vote for your Lib Dems is want to, that is up to you.
The line should have read, if you want.
My ideas on energy are, we try saving more. It is only the profits of the energy companies, that are taken care of.
You once believed in a reduced and efficient energy programme, now that seems to have been lost.
In some of the Social Housing there are even solar panels, in others no insulation and night storage heating. I would say equality is a better society, we are now far from what is fair and equal. As someone commented yesterday, from a meeting on “food banks” we are in a war time situation.
Now I understand where things are going, I asked my mother what was it like? she remarked they were hungry. Not much food. As I said in a previous comment, some starved to death in terrible conditions.
@Helen Dudden
Would such a programme be possible in the current situation, where the Lib Dems are in government with the Conservatives?
No the Lib Dems are no longer interested in those suggestions. Things have changed.
okay but how do the Lib Dems get the Conservatives to agree to such a programme? If they had a majority, then I could agree with your criticism but they only have a small number of MPs
You have managed to do enough damage in other areas.
I do dislike replying to someone, who will not give their true names. I believe in what I write.
Helen, Mr “Voter” isn’t always right, but he/she isn’t a Lib Dem loyalist, I think he/she is an independent and reasonably fair-minded person.
That could make two of us. I am not a Lib Dem, just someone who believes you have behaved badly towards those who were part of the system for many years.
I am actually believed in the Party one stage.