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Rising energy bills expose Miliband’s fantasy economics
The weather has turned very chilly. There is a thick frost on the ground, and a “beast from the east” may descend at any time.
Still, never mind. Ed Miliband, the Energy Secretary, promised us that he would take at least £300 off the average energy bill, so at least we can all afford to turn the heating up.
There is just one catch. We learnt on Friday that the energy price cap is going up yet again. In reality, the relentlessly rising cost of energy is exposing Miliband’s fantasy economics – and unless policy changes very soon, that is going to turn into a full-scale crisis.
Labour made very few promises during last year’s election campaign, but on two points it was completely clear. It would not raise any of the three main taxes, and it would cut average power bills by £300 per household.
We will find out next week whether the Chancellor Rachel Reeves can stick to the first one. But the second has already been completely shredded.
Instead of falling as expected, the energy regulator Ofgem surprised everyone by announcing that the price cap would rise again in January, just as the worst of the winter weather hits, and as a cost of living squeeze means that it is harder than ever to afford the cost of heating.
Seriously? Bills are going up again? In the background, the price of oil has been collapsing, falling to just $57 (£43.50) a barrel, down from $80 back in January. Wholesale energy prices have been going down, and are now 4pc lower over the last three months.
If there is a peace deal in Ukraine, prices might come down even further, while, of course, the massive investments the UK has been making in wind and solar power, plus all the money committed to GB Energy, should mean that domestic energy is now more plentiful than ever. And yet the average bill that the households will face is still going up.
In fairness, Ofgem is perfectly open about the reason for the increase. It “is driven by government policy costs and operating costs”, it admitted as it announced the increase.
The cost of building the Sizewell C nuclear power station will add around £1 to the average bill, while the Warm Home Discount will add an estimated 57p.
The price rise is not driven by global prices, or even by domestic supply and demand. It is entirely the fault of Miliband.
There are two big problems with that. First, he completely misled everyone during the election.
A reduction in energy bills was not a minor footnote or a passing remark that no one paid very much attention to. It was central to the Labour Party’s entire campaign at last year’s election, repeated again and again.
Despite that, it turns out that neither Miliband nor anyone else in his party had the faintest clue about how to deliver that once they were in power.
Next, and more seriously, his demented green policies are now directly pushing up prices.
Expanding our nuclear capacity is a good idea, but the fact remains that cumbersome planning restrictions mean that building a new plant costs twice as much as it does in France and four times as much as in South Korea.
If we could build a new nuclear facility at the same price as other countries can, then prices would not need to rise by so much.
Likewise, the Warm Home Discount is just another form of welfare payment to lower income households, and while that might or might not be justifiable, it would surely be better to pay for that through general taxation instead of just whacking a bit more on everyone else’s bills.
It will get worse. The Government is pressing ahead with its “boiler tax”, which will mean extra costs for anyone who is unlucky enough to have their heating system pack up over the winter.
And it is doubling down on wind power, handing out lavish subsidies to the industry that will have to be paid for years to come, even as it becomes alarmingly obvious to everyone that wind is not nearly reliable enough.
The grid can’t cope with it, and costs are not coming under control in the way you would expect (indeed, it is looking as if solar is the far more cost effective option for green energy).
Meanwhile, we are still running down our oil and gas industry in the North Sea, even though there are plentiful resources left to supply our own needs.
In reality, Miliband has lost control of the energy market. Right now, the UK needs a complete reset.
That should mean two major changes. To start with, we need to drop the green targets. The UK has already more than halved its carbon emissions, and we account for less than 1pc of the global total.
At the rate we are deindustrialising – and ExxonMobil closed a major chemicals plant in Scotland only last week, accelerating the decline of manufacturing – it will soon be even lower.
The priority right now is cheaper energy, not greener. It doesn’t matter whether it comes from wind, solar, gas, nuclear or even fossil fuels – it just needs to cost much, much less.
Next, we should drop the absurd system of price caps and controls. It is not helping anyone. We should have a plentiful supply of energy and then we should leave it to the market to decide which companies deliver it to people’s homes.
We may have only seen a modest rise this week. But no one should kid themselves about what is happening.
Energy is getting more and more expensive, and the Government is to blame for that – and unless it changes course sooner or later we are all going to freeze to death.
[Source: Daily Telegraph]
