Quick fixes won’t stop rip-off Britain

Profiteering by the Big Six isn't to blame for the huge rise in energy prices.

It is cheap to reform, could help bring down inflation, increase household income and it's a vote winner. So reforming the energy market should be a no-brainer for the government, right? Wrong.

Energy bills are the number one financial concern for the public, ahead of the cost of food and housing. The average dual fuel energy bill has increased by 75 per cent since 2004, energy companies received four million complaints last year and overcharging of loyal (often poor and old) customers is still widespread. But as with that other current target of public anger, corporate excess, the political debate is failing to make much headway with public opinion.

David Cameron's attempt to make the running on this was an energy summit held back in October last year. The only tangible outcome from the summit was action to make it easier for people to switch suppliers to get cheaper bills. Yet despite the hard times, even less people are switching now than five years ago. Over 60 per cent of people have never switched, many have no intention of doing so and those who most need to - the elderly and those on low incomes - are least able to. The coalition and now new Energy Secretary Ed Davey need to have an answer beyond simply trying and failing to increase consumer engagement in the market.

Right-wing think tanks continue to lay the blame for price rises on policies to develop renewable energy, while failing to compare this with the cost of replacing our ageing high carbon power stations, as well as the high costs of doing nothing at all. But there are blind spots on the left too.

A campaign to end energy profiteering was launched yesterday by Compass in the Independent backed by a host of leading political figures. It rightly calls for action but puts forward quick fix solutions rather than a basis for lasting reform. A windfall tax is called for by the campaign as the way to claw back excessive profits from the Big Six and price caps to prevent the costs of this being passed onto customers. But it is not clear what, if anything, a one-off regulatory intervention like a windfall tax will do to prevent underlying problems in the market.

The blame for the huge rise in prices is pinned solely on the Big Six's profits, when we know that wholesale and distribution costs have driven over 80 per cent of the price increase since 2004 and social and environmental obligations seven per cent of this. The real issue is where the profits are being made. Regulator Ofgem's own research shows that between 2005 and 2008 the Big Six's total net profits came from just 48 per cent of their customer base - largely those still with the same supplier since before market liberalisation. These customers are being overcharged to subsidise cheap offers for customers who switch suppliers in the more competitive end of the market. Though some suppliers have stopped this, others continue.

IPPR analysis to be published this spring will show how removing some of the more inequitable and anti-competitive practices in the energy market could remove barriers to new entrants, extend competition and improve market efficiency to help exert downward pressure on prices. If after this the market is still failing to deliver the benefits of competition to the vast majority of the public, there would be a strong case for more fundamental review of the market.

The London mayoral elections show how quickly the electorate can respond on cost of living issues. Ed Miliband's Rip-Off Britain campaign may not be original but it could be effective if it can set out a clear route to reform that cuts through to the public. Above all the opposition should establish a strong pro-competition stance that it would be hard for the government not to follow. The 1 in 4 households who can't pay their energy bills need action soon. Until then, they'll believe it when they see it.

Clare McNeil is a senior research fellow at IPPR.

Clare McNeil is a senior research fellow at IPPR.

Twitter: @claremcneil1

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The biggest divide in politics is not left against right, but liberals against authoritarians

My week, including a Lib Dem membership rise, The Avalanches, and why I'm putting pressure on Theresa May over child refugees.

It is a boost for us that Nick Clegg has agreed to return to the front line and be our Brexit spokesperson. I hadn’t even had a chance at our meeting to make him the offer when he said: “Before we start, I’ve been thinking about this and want to take on the fight over Europe.”

With Labour apparently willing to give the Tories a free pass to take us out of Europe, the Liberal Democrats are the only UK-wide party that will go into the next election campaigning to maintain our membership of the EU. The stage is remarkably clear for us to remind Theresa May precisely what she would be risking if we abandon free trade, free movement, environmental protection, workers’ rights and cross-border security co-operation. More than a month on from the referendum, all we have heard from the Tories is that “Brexit means Brexit” – but they have given us no clue that they understand what that means.

 

Premature obituaries

Not long ago, the received wisdom was that all political parties were dying – but lately the supposed corpses have twitched into life. True, many who have joined Labour’s ranks are so hard left that they don’t see winning elections as a primary (or even a desirable) purpose of a party, and opening up Labour to those with a very different agenda could ultimately destroy it.

Our experience has been happier: 20,000 people joined the Liberal Democrat fightback in the wake of the 2015 general election result, and 17,000 more have joined since the referendum. We now have more members than at any time this century.

 

Breaking up is hard to do

Journalists have been asking repeatedly if I want to see the break-up of the Labour Party, with moderates defecting to the Liberal Democrats. I have been clear that I am not a home-wrecker and it is for Labour to determine its own future, just as I focus on advancing the Liberal Democrat cause. Yet I have also been clear that I am happy for my party to be a home for liberals of whatever hue. I enjoyed campaigning in the referendum with a variety of progressive figures, just as moderates from different parties shared platforms in 1975. It struck me that far more unites us than divides us.

That said, not all “moderate” Labour figures could be described as “liberal”, as John Reid demonstrated as Labour home secretary. The modern political divide is less left v right than authoritarian v liberal. Both left and right are looking increasingly authoritarian and outright nasty, with fewer voices prepared to stand up for liberal values.

 

What I did on my holidays

Time off has been virtually non-existent, but I am reading A Wilderness of Mirrors by Mark Meynell (about loss of trust in politics, the media and just about everything). I’m also obsessively listening to Wildflower by the Avalanches, their second album, 16 years after their first. It’s outstanding – almost 60 minutes of intelligently crafted dialogue, samples and epic production.

During the political maelstrom, I have been thinking back to the idyllic few days I spent over half-term on the Scottish island of Colonsay: swimming in the sea with the kids (very cold but strangely exhilarating ­after a decent jog), running and walking. An added bonus is that Colonsay is the smallest island in the world to have its own brewery. I can now heartily recommend it.

 

Preparing for the next fight

The odds are weirdly long on an early general election, but I refuse to be complacent – and not merely because the bookies were so wrong about Brexit. If we have learned one truth about Theresa May as Prime Minister so far, it is that she is utterly ruthless. After her savage cabinet sackings, this is, in effect, a new government. She has refused to go to the country, even though she lectured Gordon Brown on the need to gain the endorsement of the electorate when he replaced Tony Blair. Perhaps she doesn’t care much about legitimacy, but she cares about power.

You can be sure that she will be keeping half an eye on Labour’s leadership election. With Jeremy Corbyn potentially reconfirmed as leader in September against the wishes of three-quarters of his MPs, Mrs May might conclude that she will never have a better chance to increase her narrow majority. Throw in the possibility that the economy worsens next year as Brexit starts to bite, and I rule nothing out.

So, we are already selecting candidates. It is vital that they dig in early. As we are the only party prepared to make the positive case for Europe, such an election would present us with an amazing opportunity.

 

Sitting Priti

David Cameron pledged to take an unspecified number of unaccompanied children from camps across the Continent. I am putting pressure on Theresa May to turn that vague commitment into a proper plan. Having visited such camps, I have been fighting for Britain to give sanctuary to a minimum of 3,000 unaccompanied children, who are currently open to the worst kinds of exploitation. We have heard nothing but silence from the government, with underfunded councils reporting that they are not receiving the help they need from Whitehall.

Meanwhile, it remains government policy to send refugees to Turkey – whose increasingly authoritarian government has just suspended human rights protection.

As if all of this were not grim enough, we have a new Secretary of State for International Development, Priti Patel, who has said that she thinks aid should be used largely to promote trade. As someone who wants our country to be respected around the world, I find this plain embarrassing. Actually, it’s worse. It’s shaming. As with Europe, so with the world: the ­Conservative government is hauling up the drawbridge just when we need more than ever to engage with people beyond our shores.

Tim Farron is the leader of the Liberal Democrats. To join the party, visit: libdems.org.uk/join

Tim Farron is leader of the Liberal Democrats.

This article first appeared in the 28 July 2016 issue of the New Statesman, Summer Double Issue