Blame our boom years for today's energy price news

Things get "tight and uncomfortable".

“Life could get very tight and uncomfortable around 2015 to 2018”, said Ofgem’s departing chief executive, Alistair Buchanan to the BBC’s Today Programme this morning.

The “tight and uncomfortable” refers to new energy price rises forecast amid power station closures. Coal is, in Buchanan’s words, “coming off the bars now” and nuclear and renewable sources are still in their infancy. So, in another breath of optimism, Buchanan explains: “We’re going to have to go shopping for gas in world markets... which briefly will be tight themselves, so we’ll have a double squeeze”. Again he emphasises, “Prices are going to get quite squeezy as supply and demand converge”.

Words like “uncomfortable” and “squeezy” from an influential figure like Buchanan are worrying. Although nobody yet knows quite how harsh these price rises will be, there is one certainty – this is unwelcome news.

For once, though, these unwelcome bills are not Coalition policy, they are the direct result of our boom years. International emissions agreements signed between 2004 and 2008, right before what Buchanan labels the “financial tsunami”, take most of the blame. While environmental policy, not the economy was headlining political rhetoric and green protests, not occupy movements were plaguing London’s streets, deals were made to cap emissions. These good intentions have now come back to haunt us as coal power stations are forced to close earlier than expected, and our reliance on gas doubles from 30 to 60 per cent.    

Allocating blame to the past eases the pain. Decisions have been made and we must live by the consequences. But the effects are only short-term: once our wind turbines start spinning, wave hubs start floating and nuclear power plants start...humming, we will surely be back in the black.

Photograph: Getty Images

Oliver Williams is an analyst at WealthInsight and writes for VRL Financial News

Photo: Getty
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Can Philip Hammond save the Conservatives from public anger at their DUP deal?

The Chancellor has the wriggle room to get close to the DUP's spending increase – but emotion matters more than facts in politics.

The magic money tree exists, and it is growing in Northern Ireland. That’s the attack line that Labour will throw at Theresa May in the wake of her £1bn deal with the DUP to keep her party in office.

It’s worth noting that while £1bn is a big deal in terms of Northern Ireland’s budget – just a touch under £10bn in 2016/17 – as far as the total expenditure of the British government goes, it’s peanuts.

The British government spent £778bn last year – we’re talking about spending an amount of money in Northern Ireland over the course of two years that the NHS loses in pen theft over the course of one in England. To match the increase in relative terms, you’d be looking at a £35bn increase in spending.

But, of course, political arguments are about gut instinct rather than actual numbers. The perception that the streets of Antrim are being paved by gold while the public realm in England, Scotland and Wales falls into disrepair is a real danger to the Conservatives.

But the good news for them is that last year Philip Hammond tweaked his targets to give himself greater headroom in case of a Brexit shock. Now the Tories have experienced a shock of a different kind – a Corbyn shock. That shock was partly due to the Labour leader’s good campaign and May’s bad campaign, but it was also powered by anger at cuts to schools and anger among NHS workers at Jeremy Hunt’s stewardship of the NHS. Conservative MPs have already made it clear to May that the party must not go to the country again while defending cuts to school spending.

Hammond can get to slightly under that £35bn and still stick to his targets. That will mean that the DUP still get to rave about their higher-than-average increase, while avoiding another election in which cuts to schools are front-and-centre. But whether that deprives Labour of their “cuts for you, but not for them” attack line is another question entirely. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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