The problem with Cameron's energy plan

A tariff is not "the lowest" if it's the only one available.

When David Cameron boldly declared, to the surprise of his ministers, that the government would force energy companies to put all their customers on the lowest tariff available, few expected his proposal to last. But the coalition will today attempt to fulfil the Prime Minister's pledge. Energy Secretary Ed Davey is expected to announce that suppliers will be required to offer no more than four core tariffs (including fixed and variable rates) and to automatically move customers on to the cheapest one in each case.

Yet if companies are forced to offer consumers the lowest tariff in each category (be it fixed rate or variable), this won't be the lowest tariff available - it will be the only one. It would be as accurate to call it "the highest" tariff as it would be to call it "the lowest". And why should we assume that this single tariff will be set at the lowest rate currently available? The danger is that that the "Big Six" will simply raise the level of the lowest tariff, so that consumers pay no less, or even more, than at present. Ann Robinson, director of consumer policy at uSwitch, has warned that the unintended consequence of the move will be "to kill competition". She told the Guardian: "Consumers will be left with Hobson's choice – there will be no spur, no choice, no innovation and no reason for consumers to engage any more."

Labour too is sceptical. Shadow energy secretary Caroline Flint notes that "the cheapest deal in an uncompetitive market will still not be a good deal. Unless David Cameron stands up to vested interests in the energy market and creates a tough new watchdog with powers to force energy companies to pass on price cuts his warm words will be cold comfort to people worried about paying their fuel bill this winter. "

In promising to win a better deal for consumers and denouncing the last Labour government for its failure to do so, Cameron has raised significant expectations. If he proves unable to fulfil them, it is his government that will pay the price.

David Cameron with Energy Secretary Ed Davey. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.