General election 2017: Tories vow to end 'rip-off' energy bills


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British Gas

Theresa May has vowed to end the “injustice” of rising energy costs by including a cap in the Conservative general election manifesto.

The PM said the energy market “is not working”, with vulnerable people worst hit by “rip-off” bills.

Industry figures have criticised the plan, first announced last month, saying it could lead to higher prices.

Labour, which offered its own bill cap ahead of the 2015 election, accused the Tories of “desperate stuff”.

It challenged the Tories to guarantee bills would not rise next year under a Conservative government.

Under the Conservative proposal, industry watchdog Ofgem would set a cap for the default standard variable tariffs, which are often criticised as bad deals for consumers by industry watchdogs.

“Like millions of working families, I am fed up with rip-off energy prices,” Mrs May wrote in The Sun. “Gas and electricity bills only ever seem to go in one direction, eating up more and more of your monthly pay packet.”

Mrs May suggested the move could save about 17 million customers up to £100 a year. Seven out of 10 households are on these rates.

‘Not working’

The PM said five of the “big six” energy companies had recently raised prices while their profit margins hit “record levels”.

“It is clear to me that the energy market is not working for ordinary working families. Too many people simply aren’t getting a fair deal.”

Business Secretary Greg Clark told BBC Breakfast that the Tories were proposing a “safeguard tariff” to ensure people did not “pay through the nose”.

Asked how this would be calculated and how much customers could potentially save, he said Ofgem would determine the “maximum level” taking into account factors such as wholesale energy prices and the cost of distribution.


Analysis

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By Norman Smith, assistant political editor

This is broadly similar to what Ed Miliband presented at the last election. While there are a few differences – it is a cap not a freeze, and the regulator will police it, not politicians – in intention and principle it is an old Labour policy being presented by Theresa May.

Mrs May is presenting herself almost – certainly on economic matters – as a Red Tory.

She does believe in state intervention. She does believe in taking action where there are rigged markets. She does believe the state can be a force for good and she does want the Tory Party to stand up for those she calls the “just about managing” – the ordinary working families who might have conventionally looked to Labour.

The energy companies are horrified and there are many Conservatives who are, privately, deeply anxious because many of the criticisms that were targeted at Ed Miliband when he first mooted this policy absolutely apply again.

There are risks it will encourage firms to put up their prices and cluster towards the cap. There are signs that that may be happening already.


The BBC understands there was some opposition in the cabinet to the proposal.

British Gas owner Centrica said it did not believe in “any form of price regulation”.

In a trading update, the firm said: “Evidence from other countries would suggest this will lead to reduced competition and choice, and potentially higher average prices.”

There is evidence that some suppliers have started raising the price of their cheapest offers, but some in the industry put that down to rising wholesale costs rather than the threat of the cap.

Energy UK, which represents the “big six” energy firms as well as smaller players, said it was wrong to say the market was “static” given there were 50 suppliers and five million people switched last year.

‘Desperate stuff’

Chief Executive Lawrence Slade told BBC Radio 4’s Today a cap could have “serious unintended consequences” and suggested people could save much more than £100 by visiting a price comparison website.

“I worry that all this competition that we are starting to see could go away, we have seen that in other markets,” he said. “”It risks investment and it does ultimately risk profit levels.”

According to Citizens Advice, about 800,000 of the poorest pensioners and 1.5 million low-income families with children are on standard variable tariffs.

These households are paying an average of £141 more a year for a dual fuel gas and electricity bill than if they were on the cheapest deal, it said.

Last year, the Competition and Markets Authority recommended a cap on pre-paid energy bills – a measure that was introduced last month.

It decided that to extend this to all standard variable customers would “run excessive risks of undermining the competitive process – notably by reducing the incentives of customers to engage and increasing regulatory risk – likely resulting in worse outcomes for customers in the long run”.

Under former leader Ed Miliband, Labour went into the 2015 general election promising to freeze energy bills, saying they would be able to fall but not rise.

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Responding to the Tories’ latest comments, shadow chief secretary to the Treasury Rebecca Long-Bailey said: “This is desperate stuff from the Tories, re-announcing something they tried to get a headline for just a fortnight ago.

“When the Tories say they’ll ‘cap’ bills, the question they need to answer is whether they can guarantee bills won’t go up for people next year – that’s the real test. A cap suggests a maximum amount that can be charged, not a promise that bills won’t go up year on year.”

Lib Dem former energy secretary Ed Davey said: “It is never a good idea to copy the economic strategy of Ed Miliband. As the Conservatives pointed out at the time, this will damage investment in energy when it is needed more than ever.”

The main parties have yet to publish their full manifestos ahead of the 8 June general election.



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