Ed Miliband’s energy price freeze has achieved its primary aim: grabbing headlines. Under fire after a grim summer and lacklustre interviews at the start of his party’s conference, he needed something to cut through and get people talking on his terms, and in that sense he has succeeded.
It is down to the Conservatives as to whether the policy achieves its secondary aim, which is to force us to take the side of the Big 6 energy firms.
Unsure of quite who he is politically, Miliband has chosen to define himself by what he is against, in the hope of thereby dictating his opponents’ identity. Strategically, it’s a clever piece of positioning – he wants to be able to offer a binary choice to the electorate between him, freezing prices, and the Tories, defending the status quo.
It’s a false dichotomy, which is why David Cameron must not accept Milband’s reasoning. The real choice for an effective energy policy is not between centralised state control and crony capitalism, it is between centralised state control and lower taxes, cheap energy sources and real competition.
Miliband’s proposals have huge downsides. Already Labour are refusing to say what would happen if, having fixed consumer prices, a crisis in the Middle East drives the wholesale price of gas and oil higher than the price at which they are allowed to sell energy. The growing gap between generation and consumption requires sizeable investment, which the nation is already struggling to secure – and yet Ed now proposes to restrict or eliminate any returns investors might make on building the power stations we need, further deterring action to head off blackouts. Industry analysts are warning that companies may hike prices in Winter 2014/15 to hedge against a Labour victory, and the decarbonisation targets he set out will pile yet more costs onto consumers.
Notably, Centrica have said that if Labour were to implement this policy, they would leave the UK. The Left celebrate at their departure, but given that the Big Six do not provide the competition required to serve consumers, why would a Big Five do a better job? A nationalised Big One would be still worse. Instead, we need a Big 50 or a Big 500, opening the energy market to real, widespread competition by reducing the barriers to new entrants and ending the current stitch-up.
Evidently the passage of time and the behaviour of the Big Six has eroded the memory of quite how badly state-controlled industry and fixed prices harmed British consumers. Miliband’s policy will certainly turn heads, and will attract some voters back to the flame which previously burned all of us, unless David Cameron can outdo him. Labour should be firmly criticised for the economic devastation their plan would cause, but that can only be done in tandem with a workable alternative plan.
A defence of the status quo is not viable, and the argument that our energy prices are some of the lowest in Europe is doomed to fail. The latter is certainly true, but it does not change the fact that bills are high and rising, or that our prices are far higher than those enjoyed by industrialised competitors such as the USA.
The opportunity for the Conservatives comes from understanding what the objectives of an energy policy should be. The nation needs energy that is simultaneously affordable and reliable. Labour are focusing on a top-down solution to affordability, at the expense of reliability. We must fulfil both criteria.
Developing a real alternative will require some bold decisions, and some ditching of past mistakes which some modernisers may find painful. Proposals such as the ban on the most expensive energy tariffs are not only arbitrary, they are an attempt to play Miliband at his own, socialist game. Not only do such games always fail, but even if we wanted to play then the son of a Marxist academic with the backing of Len McCluskey will always be able to out-socialist a Tory Prime Minister.
The same goes for green taxes on energy – not only are they ineffective and a burden on consumers, but Ed Miliband is the Ronald to their McDonald’s. No-one could better personify costly green initiatives unless they painted themselves green and went pickpocketing, an approach which would be electorally inadvisable. By the same token, we can’t even point to the large amount added to consumer bills by the policies he implemented as Energy Secretary until we stop loyally following the very same path he set out in Government.
We Conservatives should be responding to Miliband by pledging to open up new, cheap energy sources, such as shale gas, on a large scale; by destroying the dominance of the Big Six through a radical expansion of competition; by putting a wrecking ball through the complex web of taxes, subsidies and levies which he imposed on consumers; by celebrating affordable energy as part of the restoration of British manufacturing. Only then can we get onto why his proposals won’t work, armed with the message that ours can.