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

Getty
Show Hide image

Fears over Notting Hill Carnival reveal more about racism than reality

Statistically, the event is about as safe as Glastonbury.

Notting Hill carnival is terrifying. As soon as the sun sets, gangs emerge ready to prey on unsuspecting attendees with Red Stripe cans fashioned into knives. Children barter for drugs. Dancing is punctuated by ceremonial burials for those killed in between every dancehall tune. And that's just on the kids’ day.

Except, it's not true. Statistically, the event is about as safe as Glastonbury - if not safer, judging by the number of arrests. In 2015, Glasto was praised for its low arrest rate (75 arrests for a crowd of 135,000), but in the same year carnival had ten times the capacity and fewer than ten times the offences.

Despite these statistics, the police, MPs and newspapers seem desperate to paint carnival as a gang-run danger zone. The Met Police recently tweeted about a kilo of heroin seized in the run up to carnival, despite not even knowing whether the perpetrators were going to the event. MPs, such as former Kensington MP Victoria Borwick, are happy to fuel this fire, claiming to be concerned about the supposed “year on year increase in violence and physical harm to our police officers and members of the public”. Newspapers revel in publishing large spreads about the raids in the run up to the two days, despite lacking evidence they’re even connected. Break this down and it’s clear: this dislike towards carnival roots itself in racism - the presumption that a festival celebrating black, West Indian culture, frequented by a higher proportion of black British punters, must inevitably, be violent.

I have been attending carnival since the age of six, when my parents moved to the area (90s gentrification alert). I used to sell Ribena for a markup on my street, took part in the float my primary school ran and every year witnessed the incredible recontextualisation of the area. Gone is the whitewashing for a moment: the streets and houses become splattered in neon paint, jerk chicken boxes and Red Stripe cans. It is one of the best things to happen to the area, and its vast cultural value exceeds the bougie cafes and boutique clothing stalls that span the area.

And yet, every year, I have to dodge questions from relatives and friends about how dangerous it supposedly is. “Ooh, Notting Hill carnival. Bit scary, isn't it? Lots of angry youth who can get quite violent I hear. Didn't someone get stabbed last year?” Perhaps a viable question to ask anyone going to a crowded event. Except, why weren’t they asking me this when I flew to Amsterdam this year to go to a music festival?

There's another side of critiquing carnival that is equally infuriating, and that's that the fact that the event in some ways stands as a consolation prize to the original tenants of the area. In the middle of the 20th Century, Notting Hill was far from the Russian oligarch haven it is today. It was the Windrush Era, when black immigrants began arriving from the Caribbean. They came not out of some overwhelming desire to be freezing for 11 months, but because Britain was struggling after the Second World War, and desperately needed a labour force. Despite the demand, the West Indians were met with hostility and racism, forced to live in the worst areas of London. One of those places was Notting Hill.

Imagine, then, the audacity of shaming carnival. Imagine being forced by racism into a rundown neighbourhood, turning it into something fashionable, and then being priced out by middle-class white people. Imagine on top of that, having your legacy celebration degraded under the guise of safety concerns.

This year will feel different. It will be the first year ever under a Labour MP. It will also come two months and a half months after the Grenfell fire, where many of its residents and victims will have taken part in the event. Whilst there’s something defiant in these parades, it will be hard for the collective joy not to be marred by a knowledge that somewhere in this borough, bodies are being buried because of our council.

We need to see carnival for what it is: a celebration of a culture struggling to stay afloat in the area. Kensington continues to edge out those who may not be living in £2.5m homes - whether it’s with rising house prices, creating anxiety around an event or even putting lives at risk due to sheer disregard and greed. If you’re worried about going, I would avoid all large, crowded events in general, because there’s no use believing the vacuous and racist hype. Beyond getting splattered with paint and dancing too enthusiastically to Bashment, there’s nothing to fear.