Ed Miliband's critics think his energy pledge will make the lights go out. They are wrong

The energy companies are squealing over the Labour leader's proposed freeze on energy prices, warning of blackouts. They ignore the fact that the lights are already going out - for the 4.5 million people living in fuel poverty.

Ed Miliband’s pledge yesterday, to freeze energy prices until 2017 while reforming the market, appears to have plucked a rather sensitive chord. The reaction is, to a large extent, par for the course. Nobody truly expected the energy industry or right-wing press to welcome these developments. The knee-jerk reaction has been predictably swift and forceful. In my years working for a regulator, I can scarcely remember an industry representative faced with any kind of intervention who has not claimed that this would immediately bring about the end of their industry and civilisation as we know it.

The initial reaction from commentators was that Miliband has proven he does not understand how free markets work, followed by a number of irrelevant comparisons with inappropriate markets. All this has served to prove, is that the commentators in question don’t understand how a free market works or, indeed, what one looks like.

Energy supply in the UK is not just any market and it is as far away from a "free" market as one could get, skewed as it is by a long list of factors. Forgive the boring economic bit – I will attempt to make it as brief and simple as I can. Skip, if you must.

The market is an oligopoly (controlled by very few giant players). It is vertically integrated (the same companies which sell us energy at the retail level, largely sell it to themselves at wholesale level). There are significant barriers to entry (the costs and difficulty of setting up an energy company to compete are massive). There are asymmetries of information and barriers to switching at consumer level (because of a proliferation of tariffs, schemes and guarantees it is difficult to glean the cheapest supplier and, even if one does, switching is not easy). The aggregate retail market for energy is an essential commodity with very few realistic alternatives (it’s not like we could stop consuming the stuff or switch to burning government white papers for heat and light). In short, if an economics professor were trying to give an example of a market with the potential to be dysfunctional and require state regulation, energy would not be far from the top of the list.

Next, came the "poor energy companies making no money, really" defence. It was spearheaded by Angela Knight, the former Conservative MP who represented investment managers and stockbrokers during the decade of that industry’s worst excesses, was in charge of defending the British Bankers’ Association during the financial crisis, and assured the nation in 2008 that Libor was "a reliable benchmark". She made much of the fact that almost half of the energy retail price can be accounted for by the wholesale price, while dishonestly obscuring the fact that it is largely the very same companies that set and profit from the wholesale price.

Finally, the most desperate and starkest of warnings: "the lights will go out". What about the Californian energy shortages and blackouts, asked Andrew Neil on the Daily Politics? I don’t know whether this comparison was cynical or ill-informed. The “California Electricity Crisis” was not the result of regulation, but a process of deregulation which started in 2000-01. What is more, it has since been shown to have hinged on unlawful manipulation of supply by disgraced energy giant Enron. If ever there was a compelling example in favour of the tightest regulation of energy markets, it is this precise instance.

Centrica, a company which announced a near 10 per cent rise in its profit this year while simultaneously issuing a price rise warning, has threatened to quit the UK altogether over this perceived outrage. Other energy companies have made similar noises. And yet, “the big six” operate in a multitude of countries where degrees of price regulation, in many cases much harsher and more permanent than what is being proposed here, are in effect. As a matter of fact, only nine of the twenty-seven EU member states do not exercise some form of price regulation of energy retail prices, much to the chagrin of the European Commission.

One of the biggest players, Électricité de France or EDF to you and me, is owned by the French state and provides electricity to its French customers at heavily regulated and considerably lower prices than its British ones. Britain has one of the highest rates of energy inflation in both the EU and the OECD and has done for many years. Amid significant and evidenced allegations of "ripping off" and "market rigging" how can anyone support the notion that government just needs to step out of the way and let markets do their magic? Households today spend double the proportion of their income on energy bills than they did a mere eight years ago.

The counterargument, that energy companies will simply hike prices before the election, is naïve. Politically, they are pretty snookered. A hike before May 2015 would make this even more of an election issue – perhaps a transformative one. Helping install a Labour government is the very last thing these conglomerates would want right now. Not to mention that it may force Cameron into a similar pledge. The idea that they will put up prices immediately after the freeze is similarly misconceived; ignoring, as it does, that the reason for it is to facilitate deeper market reform by 2017.

At its heart, this hysteria over the Labour leader’s pledge betrays an evangelical belief in free markets self-correcting, whatever the cost; the very same misplaced faith which meant few predicted the global financial crisis. We continue to anthropomorphosise – markets are nervous, markets are jittery, markets are pleased, markets are calm – sacrificing figurative goats to appease volcanoes. Forgetting all the while, that these artificial constructs – markets, companies, banking, lending, money – were put in place to facilitate our existence, not the other way around. When they cease to enhance the lives of the vast majority, it is time to go back to the drawing board.

"The lights will go out," we are warned. The single pertinent fact, which seems to have escaped every single detractor, is that the lights are already going out for the 4.5 million households living in fuel poverty in the UK, right now. Reform is not only desirable, but absolutely essential.


Politicians are always trying to appease "the market" with figurative goats. Why?

Greek-born, Alex Andreou has a background in law and economics. He runs the Sturdy Beggars Theatre Company and blogs here You can find him on twitter @sturdyalex

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Clive Lewis interview: I don't want to be seen as a future Labour leader

The shadow business secretary on his career prospects, working with the SNP and Ukip, and why he didn't punch a wall. 

“Lewis for leader!” Labour MP Gareth Thomas mischievously interjects minutes after my interview with Clive Lewis begins. The shadow business secretary has only been in parliament for 18 months but is already the bookmakers’ favourite to succeed Jeremy Corbyn. His self-assuredness, media performances and left-wing stances (he backed Corbyn in 2015 and again this year) have led many to identify him as Labour’s coming man.

On 19 September, I met Lewis - crop-haired, slim and wearing his trademark tweed jacket - in Westminster's Portcullis House. He conceded that he was flattered by the attention (“It’s lovely to hear”) but was wary of the mantle bestowed on him. “This place has lots of ex-would-be leaders, it’s littered with them. I don’t want to be one of those ex-would-be leaders,” the Norwich South MP told me. “I don’t want a big fat target on my head. I don’t want to cause the resentment of my colleagues by being some upstart that’s been here 18 months and then thinks they can be leader ... I’ve never asked for that. All I want to do is do my job and do it to the best of my ability.”

But he did not rule out standing in the future: “I think that anyone who comes into this place wants to do what’s best for the party and what’s best for the country - in any way that they can.”

Lewis, who is 45, was appointed to his current position in Labour’s recent reshuffle having previously held the defence brief. His time in that role was marked by a feud over Trident. Minutes before he delivered his party conference speech, the former soldier was informed that a line committing Labour to the project’s renewal had been removed by Corbyn’s office. Such was Lewis’s annoyance that he was said to have punched a wall after leaving the stage.

“I punched no walls,” he told me a month on from the speech. “Some people said to me ‘why don’t you just play along with it?’ Well, first of all it’s not true. And secondly, I am not prepared to allow myself to be associated with violent actions because it’s all too easy as a black man to be stereotyped as violent and angry - and I’m not. I’m not a violent person. Yes, it’s a bit of fun now, but very quickly certain elements of the media can begin to build up an image, a perception, a frame ... There’s a world of difference between violently punching a wall and being annoyed.”

Lewis said that he was “happy with” the speech he gave and that “you’re always going to have negotiation on lines”. The problem, he added, was “the timing”. But though the intervention frustrated Lewis, it improved his standing among Labour MPs who hailed him as the pragmatic face of Corbynism. His subsequent move to business was regarded by some as a punishment. “Do I think there was an ulterior motive? I’ll never know,” Lewis told me. “I’m confident that that the reason I was moved, what I was told, is that they wanted me to be able to take on a big portfolio”.

Nia Griffith, his successor as shadow defence secretary, has since announced that the party will support Trident renewal in its manifesto despite its leader’s unilateralism. “Jeremy Corbyn deserves credit for that,” Lewis said. “I think everyone understands that Jeremy’s position hasn’t changed. Jeremy still believes in unilateral disarmament, that is his modus operandi, that’s how he rolls and that’s one of the reasons why he is leader of the Labour Party ... But he’s also a democrat and he’s also a pragmatist, despite what people say.”

Lewis, himself a long-standing opponent of Trident, added: “You need a Labour government to ensure that we can put those nuclear missiles on the table and to begin to get rid of them on a global scale.”

He also affirmed his support for Nato, an institution which at times Corbyn has suggested should be disbanded. “The values that underpin Nato are social democratic values: liberty, democracy, freedom of expression. Let’s not forget, it was Clement Attlee and the New Deal Democrats that initiated and set up Nato. It’s about being in it to win it, it’s about winning the arguments inside Nato and making sure that it’s a force for good. Some people would say that’s impossible. I say you’ve got to be in it to be able to make those changes.”


Clive Anthony Lewis was born on 11 September 1971 and grew up on a council estate in Northampton. It was his Afro-Caribbean father, a factory worker and trade union official, who drew him to politics. “My dad always used to say “The Labour Party has fought for us, it’s really important that you understand that. What you have, the opportunities that working people and black people have, is down to the fact that people fought before you and continue to fight.”

After becoming the first in his family to attend university (reading economics at Bradford) he was elected student union president and vice president of the NUS. Lewis then spent a decade as a BBC TV news reporter and also became an army reservist, serving a tour of duty of Afghanistan in 2009. He was inspired to enlist by his grandfather. “He fought in Normandy in the Second World War and I used to go back over with him and see the camaraderie with the old paras ... Whatever people’s views of the armed forces, that’s one thing that no one can take away, they generate such friendships, such a bond of union”.

Lewis told me that his time in the military complemented, rather than contradicted, his politics. “I think many of the virtues and values of the army are very similar to the virtues and values of socialism, of the Labour Party. It’s about looking out for each other, it’s about working as a team, it’s about understanding. The worst insult I remember in the army is ‘jack bastard’. What that said was that you basically put yourself before the team, you’ve been selfish”.

He added: “People have to remember that the armed forces do as democratically elected governments tell them to do. They don’t arbitrarily go into countries and kick off. These are decisions that are made by our politicians.”

After returning from service in Helmand province, he suffered from depression. “I met guys who had lost friends, seen horrible things and they had ghost eyes, dead eyes, it’s the only way I can describe it. People that I saw had far more reason to have depression or worse. Part of my negative feedback loop was the fact that I felt increasingly guilty about being depressed because I didn’t feel that I had the right to be depressed because I knew people who’d seen far worse ...  I’m now told that is quite common but that doesn’t make it any easier.”

Lewis added: “It makes you realise that when the armed forces go abroad, when they do serve on our behalf, what they do, what they go through, that’s not something that anyone can take away from them.”

In May 2015, he was one of a raft of left-wing MPs (Richard Burgon, Rebecca Long-Bailey, Kate Osamor, Cat Smith) to enter parliament and back Corbyn’s leadership bid. As shadow business secretary, he believes that Brexit and Theresa May’s economic interventionism offer political openings for Labour. “I feel debate is moving onto natural Labour territory. But not the Labour territory of the 1970s, not picking winners territory. It’s moving to a territory that many on the left have long argued for, about having a muscular, brave, entrepreneurial state which can work in partnership with business”.

He added: “We can say we’re the party of business. But not business as usual ...  I think there are lots of people now, and businesses, who will be aghast at the shambles, the seeming direction we seem to be going in.

“The British people have spoken, they said they wanted to take back control, we have to respect that. But they didn’t vote to trash the economy, they didn’t vote for their jobs to disintegrate, they didn’t vote to see their businesses decimated, they didn’t vote to see a run on the pound, they didn’t vote for high levels of inflation.”

On the day we met, an Ipsos MORI poll put the Tories 18 points ahead of Labour (a subsequent YouGov survey has them 16 ahead). “I’m not too spooked by the polls at the moment,” Lewis told me when I mentioned the apocalyptic figures (he has a potentially vulnerable majority of 7,654). “Nobody wants to be where we are but I’m quite clear that once we get up a head of steam we’ll begin to see that narrow. I definitely don’t have any doubts about that, it will begin to narrow.”

Lewis is a long-standing advocate of proportional representation and of a “progressive alliance”. He told me that Labour, the Liberal Democrats and the Green Party should have fielded a single pro-European candidate in the recent Witney by-election (which the Conservatives won with a reduced majority) and that he was open to working with the SNP.

“There are lots of people, including the Scottish Labour Party, who are aghast that you can say that. I think it has to be put out there. I want to see a revival of Scottish Labour but we also have to be realistic about where they are, the time scale and timeframe of them coming back.

“I’m not talking them down, I’m simply saying that we want to see a Labour government in Westminster and that means asking some hard questions about how we’re going to achieve that, especially if the boundary changes come in ... If that means working with the SNP then we have to look at that.”

Even more strikingly, he suggested that Labour had to “think about talking to parties like Ukip to try and get over that finishing line.”

Lewis explained: “If Ukip survive as a political force these coming weeks and months they’re obviously pro-PR as well. I despise much of what Ukip stand for, it’s anathema to me, but I also understand that it could be the difference between changing our electoral system or not ... These are things that some people find deeply offensive but I’ve not come into politics to duck the tough issues." 

He praised Corbyn for “having won” the argument over austerity, for his “dignified” apology over the Iraq war and for putting Labour in surplus (owing to its near-tripled membership of 550,000).

“History will show that Jeremy Corbyn was someone who came in at a time when politics was tired, people were losing faith in it, especially people who come from the progressive side of politics.

“Whatever people think of Jeremy’s style, whatever they think of his leadership, whatever they think of him personally, you can’t take that away from him. He’s revived politics in a way that we haven’t seen in this country for a long time. I know he’s got his doubters and detractors but I think ultimately he’s made our party in many ways stronger than it was a year ago.”

I asked Lewis whether he expected Corbyn to lead Labour into the next general election. “Yes, I do. And I think it depends when that general election is. If it’s next year then most certainly.

“If it’s 2020? That’s a question for Jeremy. I think, as I understand it, he is going to but I don’t know the inside of his mind, I don’t know what he’s thinking. I haven’t heard anything to suggest that he has anything other than the intention to lead us into a general election and to become prime minister.”

Of his own prospects, he remained equanimous. “Always be wary of Greeks bearing gifts. It’s lovely to hear but I know my own fallibilities and weaknesses.

“I haven’t come from a background where I’ve had it imbued in me from an early age that I’m destined to lead or to rule. I don’t have that arrogant self-belief, the sense of entitlement that it’s coming my way or should do. I can’t believe I’m in the House of Commons and I can’t believe that I’m shadow business secretary. I still pinch myself. That’s enough for me at the moment, it really is. That’s the honest truth.”

George Eaton is political editor of the New Statesman.