The shamelessness of the energy companies shows why we need a price freeze

British Gas's suggestion that households should simply use less energy is blackly humorous. But customers won't see the funny side.

Following last week’s announcement that SSE, the biggest supplier of energy to Welsh households, is to increase prices by 8.2%, yesterday came the announcement that Britain’s second biggest supplier, Centrica (AKA British Gas) is to follow suit with a 9.2% hike. Though customers will not see the funny side, the press release from British Gas, defending its decision, is a blackly humorous read. It begins with an acknowledgement that Ed Miliband is right: "the cost of living is rising faster than incomes". Then there’s a passage of hand-wringing regret that despite these tough times for customers, our bills have to go up by almost 10% to maintain their profitability. Before, finally, in a statement almost beyond parody, the company’s managing director, Ian Peters, reassures us: "A price rise doesn’t necessarily mean energy bills have to go up too. The amount you pay depends not just on the price, but on how much gas and electricity you use."
 
And he’s right, of course. You could just not turn on the boiler or the cooker and save a fortune. Why didn’t we think of that earlier? It would certainly make life easier for David Cameron, who, having so spectacularly failed to stand up to the energy companies in the interests of ordinary families, looks like a man who would give anything to make the problem go away.
 
Since I was having such fun reading the press release, I thought I’d take a look the Annual Accounts and Report for British Gas’s parent company, Centrica, to see if they were as much of a laugh. I was not disappointed.
 
Sam Laidlaw, the group’s chief executive, concludes his introductory remarks with the cool observation that "Centrica has a robust balance sheet and generates strong cashflows". He’s not kidding. British Gas – the bit putting up their prices today – made a post-tax profit of £1.09bn last year, up from the £1.01bn it made in 2011, though not as much as the £1.22bn it made in 2010. Within that consistent £1bn-plus profit, the sales to residential customers have been looking good too: up to £606m from the £544m posted in 2011.
 
The bit of the company generating the energy to sell to British Gas (i.e. itself) is called Centrica Energy, and its numbers are even better. In 2012, the energy generation arm made a post-tax profit of £1.2bn, £200m better than the year before and £500m better than 2009, the last year a Labour government was in charge. Little wonder the smiles are so broad on the faces of the board members’ pen-pictures, when share prices have risen by a third since May 2010 and top managers’ salaries with them: Mr Laidlaw’s total remuneration was almost £5m in 2012, his understrapper at British Gas making do with £3m.
 
What the accounts don’t tell us, of course, is the real amount it costs Centrica to generate the energy which it then sells on to British Gas at the going market rate – a market rate that itself reflects the wholesale prices set by the big six companies. It’s a circular process - in which the only real loser appears to be the paying customer at the end of the pipeline or the power cable, watching nervously as the wheel spins ever faster in the black-box under the stairs. Labour can’t stop the wheel turning, but we can freeze the price of each revolution and therefore your overall bill. And we will.
The entrance to Leicester's British Gas Centre. Photograph: Getty Images.

Owen Smith is a Labour leadership candidate and MP for Pontypridd. 

How Jim Murphy's mistake cost Labour - and helped make Ruth Davidson

Scottish Labour's former leader's great mistake was to run away from Labour's Scottish referendum, not on it.

The strange revival of Conservative Scotland? Another poll from north of the border, this time from the Times and YouGov, shows the Tories experiencing a revival in Scotland, up to 28 per cent of the vote, enough to net seven extra seats from the SNP.

Adding to the Nationalists’ misery, according to the same poll, they would lose East Dunbartonshire to the Liberal Democrats, reducing their strength in the Commons to a still-formidable 47 seats.

It could be worse than the polls suggest, however. In the elections to the Scottish Parliament last year, parties which backed a No vote in the referendum did better in the first-past-the-post seats than the polls would have suggested – thanks to tactical voting by No voters, who backed whichever party had the best chance of beating the SNP.

The strategic insight of Ruth Davidson, the Conservative leader in Scotland, was to to recast her party as the loudest defender of the Union between Scotland and the rest of the United Kingdom. She has absorbed large chunks of that vote from the Liberal Democrats and Labour, but, paradoxically, at the Holyrood elections at least, the “Unionist coalition” she assembled helped those parties even though it cost the vote share.

The big thing to watch is not just where the parties of the Union make gains, but where they successfully form strong second-places against whoever the strongest pro-Union party is.

Davidson’s popularity and eye for a good photo opportunity – which came first is an interesting question – mean that the natural benefactor in most places will likely be the Tories.

But it could have been very different. The first politician to hit successfully upon the “last defender of the Union” routine was Ian Murray, the last Labour MP in Scotland, who squeezed both the  Liberal Democrat and Conservative vote in his seat of Edinburgh South.

His then-leader in Scotland, Jim Murphy, had a different idea. He fought the election in 2015 to the SNP’s left, with the slogan of “Whether you’re Yes, or No, the Tories have got to go”.  There were a couple of problems with that approach, as one  former staffer put it: “Firstly, the SNP weren’t going to put the Tories in, and everyone knew it. Secondly, no-one but us wanted to move on [from the referendum]”.

Then again under different leadership, this time under Kezia Dugdale, Scottish Labour once again fought a campaign explicitly to the left of the SNP, promising to increase taxation to blunt cuts devolved from Westminster, and an agnostic position on the referendum. Dugdale said she’d be open to voting to leave the United Kingdom if Britain left the European Union. Senior Scottish Labour figures flirted with the idea that the party might be neutral in a forthcoming election. Once again, the party tried to move on – but no-one else wanted to move on.

How different things might be if instead of running away from their referendum campaign, Jim Murphy had run towards it in 2015. 

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

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