While the Tories stand up for the energy companies, Labour stands up to them

Our pledge to freeze energy prices isn't a "gimmick" to customers being squeezed by corporate profiteers.

What confusing times we live in if you’re a Conservative. A fortnight ago, your leader, David Cameron, was attacking his Labour counterpart as akin to Stalin for promising an energy price freeze in Britain. A few days ago he changed tack and conceded that Ed Miliband might have "struck a chord" with the nation for pointing out that energy bills are outstripping wages for average families in our country. Then yesterday, another volte-face, at PMQs, when the Prime Minister seemed keener to defend the energy companies’ profits than concede that the British people might need their government to freeze prices on their behalf. Blinded by faith in the market – no matter how broken it might be – Mr Cameron appears to have permanently misplaced his Tory instinct that the customer should be king. Tell Sid about that.

I wonder if the Prime Minister knew yesterday, when he described Labour’s pro-customer stance as a "socialist gimmick" from a "Marxist universe", that this morning the energy company SSE planned to announce an inflation-busting 8.2% price rise for their customers across Britain – a million of whom live in Wales. He may not have done, but he might have anticipated it was coming given that SSE hiked their prices by 9% last year too. And even through the fog of confusion, he must surely have seen the injustice of such increases being imposed on customers in places like Wales where energy bills are already among the highest and the wages to pay them lower than elsewhere.

Of course the company would have us believe that these prices rises are necessary to allow reasonable returns to shareholders who are investing in infrastructure improvements, complying with decarbonisation targets and facing increased wholesale costs. And those claims might carry more force were the truth not that SSE announced in March an operating profit for its retail arm of £410m, as part of an overall pre-tax profit of £1.4bn for the group’s network, generating and retail arms as a whole. No wonder they can afford to pay their chief executive a £755,000 basic salary and their finance director a mere £610,000, when those profits rose 18.9% in the particularly lucrativenNetworks arm (the wires and pipes which constitute part of their £6.36bn 'Natural Monopoly Business') and a whopping 27.5% in the retail arm which is milking its customers. No wonder, too, they could afford to pay the £10.5m fine imposed by Ofgem earlier this year for mis-selling to those same customers by misleading them about the savings they might make by switching to SSE tariffs.

In Wales, where energy prices, according to the Department for Energy and Climate Change, are already the highest in Britain, at an average of £1,310 per annum versus £1,279 across the rest of the UK, the news that SSE intends turn the screw in order to deliver above-inflation dividends next year will land with the force of an SSE bill on the doormat. Wages in Wales have fallen by an average of £1,700 per household since the Tory-led coalition came to power and disposable incomes have traditionally always been lower in our post-industrial economy. The cost of living crisis is felt at its sharpest here.

Wales needs a government in Westminster to stand up to these companies and demand that they desist from the profiteering in which they are clearly engaged. Ed Miliband is asking for the opportunity to lead such a government and his words of warning to SSE and their five fellow companies have rung out across the country. When looking for comparators for Ed, David Cameron might do well to well to drop the McCarthyite rhetoric of reds under the bed, and reflect instead on the relevance of another figure from US politics: Theodore Roosevelt and the 'trust-busting' policies which carried him to power. Mr Cameron has a choice to make: does he want to stand up for the energy companies or stand up to them? We already know the choice Ed Miliband has made: we will speak for the people and freeze that bill.

David Cameron speaks at the Conservative conference in Manchester last week. Photograph: Getty Images.

Owen Smith is Labour MP for Pontypridd and Shadow Secretary of State for Work & Pensions.

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North Yorkshire has approved the UK’s first fracking tests in five years. What does this mean?

Is fracking the answer to the UK's energy future? Or a serious risk to the environment?

Shale gas operation has been approved in North Yorkshire, the first since a ban introduced after two minor earthquakes in 2011 were shown to be caused by fracking in the area. On Tuesday night, after two days of heated debate, North Yorkshire councillors finally granted an application to frack in the North York Moors National Park.

The vote by the Tory-dominated council was passed by seven votes to four, and sets an important precedent for the scores of other applications still awaiting decision across the country. It also gives a much-needed boost to David Cameron’s 2014 promise to “go all out for shale”. But with regional authorities pitted against local communities, and national government in dispute with global NGOs, what is the wider verdict on the industry?

What is fracking?

Fracking, or “hydraulic fracturing”, is the extraction of shale gas from deep underground. A mixture of water, sand and chemicals is pumped into the earth at such high pressure that it literally fractures the rocks and releases the gas trapped inside.

Opponents claim that the side effects include earthquakes, polluted ground water, and noise and traffic pollution. The image the industry would least like you to associate with the process is this clip of a man setting fire to a running tap, from the 2010 US documentary Gasland

Advocates dispute the above criticisms, and instead argue that shale gas extraction will create jobs, help the UK transition to a carbon-neutral world, reduce reliance on imports and boost tax revenues.

So do these claims stands up? Let’s take each in turn...

Will it create jobs? Yes, but mostly in the short-term.

Industry experts imply that job creation in the UK could reflect that seen in the US, while the medium-sized production company Cuadrilla claims that shale gas production would create 1,700 jobs in Lancashire alone.

But claims about employment may be exaggerated. A US study overseen by Penn State University showed that only one in seven of the jobs projected in an industry forecast actually materialised. In the UK, a Friends of the Earth report contends that the majority of jobs to be created by fracking in Lancashire would only be short-term – with under 200 surviving the initial construction burst.

Environmentalists, in contrast, point to evidence that green energy creates more jobs than similar-sized fossil fuel investments.  And it’s not just climate campaigners who don’t buy the employment promise. Trade union members also have their doubts. Ian Gallagher, Secretary of Blackburn and District Trade Unions Council, told Friends of the Earth that: “Investment in the areas identified by the Million Climate Jobs Campaign [...] is a far more certain way of addressing both climate change and economic growth than drilling for shale gas.”

Will it deliver cleaner energy? Not as completely as renewables would.

America’s “shale revolution” has been credited with reversing the country’s reliance on dirty coal and helping them lead the world in carbon-emissions reduction. Thanks to the relatively low carbon dioxide content of natural gas (emitting half the amount of coal to generate the same amount of electricity), fracking helped the US reduce its annual emissions of carbon dioxide by 556 million metric tons between 2007 and 2014. Banning it, advocates argue, would “immediately increase the use of coal”.

Yet a new report from the Royal Society for the Protection of Birds (previously known for its opposition to wind farm applications), has laid out a number of ways that the UK government can meet its target of 80 per cent emissions reduction by 2050 without necessarily introducing fracking and without harming the natural world. Renewable, home-produced, energy, they argue, could in theory cover the UK’s energy needs three times over. They’ve even included some handy maps:


Map of UK land available for renewable technologies. Source: RSPB’s 2050 Energy Vision.

Will it deliver secure energy? Yes, up to a point.

For energy to be “sustainable” it also has to be secure; it has to be available on demand and not threatened by international upheaval. Gas-fired “peaking” plants can be used to even-out input into the electricity grid when the sun doesn’t shine or the wind is not so blowy. The government thus claims that natural gas is an essential part of the UK’s future “energy mix”, which, if produced domestically through fracking, will also free us from reliance on imports tarnished by volatile Russian politics.

But, time is running out. Recent analysis by Carbon Brief suggests that we only have five years left of current CO2 emission levels before we blow the carbon budget and risk breaching the climate’s crucial 1.5°C tipping point. Whichever energy choices we make now need to starting brining down the carbon over-spend immediately.

Will it help stablise the wider economy? Yes, but not forever.

With so many “Yes, buts...” in the above list, you might wonder why the government is still pressing so hard for fracking’s expansion? Part of the answer may lie in their vested interest in supporting the wider industry.

Tax revenues from UK oil and gas generate a large portion of the government’s income. In 2013-14, the revenue from license fees, petroleum revenue tax, corporation tax and the supplementary charge accounted for nearly £5bn of UK exchequer receipts. The Treasury cannot afford to lose these, as evidenced in the last budget when George Osborne further subsidied North Sea oil operations through increased tax breaks.

The more that the Conservatives support the industry, the more they can tax it. In 2012 DECC said it wanted to “guarantee... every last economic drop of oil and gas is produced for the benefit of the UK”. This sentiment was repeated yesterday by energy minister Andrea Leadsom, when she welcomed the North Yorkshire decision and described fracking as a “fantastic opportunity”.

Dependence on finite domestic fuel reserves, however, is not a long-term economic solution. Not least because they will either run out or force us to exceed international emissions treaties: “Pensions already have enough stranded assets as they are,” says Danielle Pafford from 350.org.

Is it worth it? Most European countries have decided it’s not.

There is currently no commercial shale-gas drilling in Europe. Sustained protests against the industry in Romania, combined with poor exploration results, have already caused energy giant Chevron to pull out of the country. Total has also abandonned explorations in Denmark, Poland is being referred to the European Court of Justice for failing to adequately assess fracking’s impact, and, in Germany, brewers have launched special bottle-caps with the slogan “Nein! Zu Fracking” to warn against the threat to their water supply.

Back in the UK, the government's latest survey of public attitudes to fracking found that 44 per cent neither supported nor opposed the practice, but also that opinion is gradually shifting out of favour. If the government doesn't come up with arguments that hold water soon, it seems likely that the UK's fracking future could still be blasted apart.

India Bourke is the New Statesman's editorial assistant.