Last weekend, Greg Barker MP was in the news speaking out in defence of recent profits recorded by energy companies in the UK. His comments came as a refreshing counter to the rhetoric we have come to expect on the subject, which focuses on ever-increasing tariffs and commonly tars the ‘Big Six’ as profiteering, greedy and exploitative. Barker instead reminded us that not only are our energy prices lower on average than many EU countries, but that we are relying on these suppliers to provide a substantial contribution to the £110 billion needed to address the issue of our crumbling energy infrastructure, and that they can’t invest in new projects without funding from old.
Barker’s words brought a different perspective to the fore, one that steers clear of knee-jerking and sensationalism, and I would have congratulated him for it independently of this week’s news. However, this was prior to the astonishing claim made by Ed Miliband during his party address on Tuesday, namely that Labour will freeze energy prices until 1st January 2017 if they win the next election.
Miliband, who served as Secretary of State for Energy and Climate Change before becoming Leader of the Opposition in 2010, has no excuse for making a pledge of this nature; if there is one area of parliament with which he should be most comfortable, it’s energy. He’s talking about privately-owned companies, who answer to shareholders and must be reactive to global supply chain movements; if he takes this freedom from them, the drop in share prices seen on Tuesday night can only move in one direction and it isn’t upwards.
Many have already labelled this policy ‘economic suicide’, as the chain of potential damage caused by any imposed cap is remarkable. There have been suggestions that affected companies will hike their prices ahead of time to make up for the losses they will otherwise incur if it is enforced, rendering the whole exercise redundant, and shareholders have already called for them to reduce investment in the UK in favour of fairer markets, which we cannot afford to risk given the state of the UK’s infrastructure.
I fail to see how Miliband wouldn’t have seen this coming, which makes it easy to view any promise to freeze prices as the worst kind of populist politics, attempting to curry favour from voters with total disregard for the consequences. If Miliband is out for total control of the energy companies, why does he not re-nationalise them? The answer is plain: the UK cannot afford to foot the bill. Which brings us back to what Greg Barker said not even a week ago: these companies need money in order to fix the mess we’re currently in. A price freeze combined with another bad winter could be devastating to the industry, and with what money are they then supposed to come to the rescue as power plants go into retirement and those that remain are no longer up to the job?
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