29 Nov 2013

An early Christmas present on energy prices?

It might be the end of November, but Chancellor George Osborne’s latest move on energy prices is an attempt to buoy the government’s fortunes with some festive cheer for voters.

It seems like Christmas starts earlier every year. And now that the chancellor’s autumn statement has been pushed into December, it feels like its all part of the celebrations. No wonder George Osborne is determined to give away sometime festive to voters next week.

You know what it’s like. Drawing up your Christmas list, trying to please everyone with what you give them despite having a limited budget to spend on the presents. So just imagine what its like for the chancellor trying to decide how he can please every voter with what he gives them in his autumn statement, and how to make sure they feel the benefit.

Drawing up your Christmas list, trying to please everyone despite having a limited budget.

A £50 give away for every household in Britain would definitely make Christmas a bit merrier. George Osborne could save us all about £50 a year by removing some government levies from our energy bills. But there is no point in the chancellor doing that if the energy companies just put up their prices by the same amount. So, industry sources have told me that there were complex and detailed discussions with the “big six” energy firms – there were even letters exchanged – in which the government asked the companies not to increase their prices if the government do reduce some of the levies in next week’s autumn statement.

Marxist cons under the tree?

Labour leader Ed Milliband – who has been unveiling his own plans to reform the energy sector today – says the government have been caught pleading privately with the energy companies whilst he is prepared to challenge them in public and demand a 20-month freeze on prices.

The government deny they are demanding a price freeze. They have to. When Ed Milliband first promised to freeze prices, they dismissed it as a Marxist con. The only problem is that the voters seemed to quite like the sound of this particular Marxist con. So now the Tories are having to dabble in a little bit of Marxist market intervention themselves. They might not be telling the energy companies to keep their prices down – but they are asking them to. And they are asking voters to believe that they can better keep down the cost of lighting up the Christmas tree by cajoling the big six, rather than threatening them.

Read more from Channel 4 News on energy prices here

David Cameron was recently reported as saying that he wanted to “get rid of all the green crap” from energy bills because the energy companies have done such a good job of portraying govt levies as the cause of rising bills – something Downing Street has denied took place. But the levies that are being reduced or removed aren’t really the green ones at all. The payments we all make that subsidise wind farms and nuclear energy – those will still be on your bill. The Lib Dems simply wouldn’t allow any reduction in the really green levies.

So it is plans to insulate homes that are being changed instead. The energy firms will have four years, rather than just two, to fulfil their energy companies obligation, which says they have to pay to insulate the homes of the poorest households. So it will take twice as long for the people who most need help with their heating bills to feel the benefit. And the warm homes discount, which subsides the bills of the most vulnerable, will be paid for out of general taxation – not a levy on your energy bill. So you will still be paying for it – just in a different way.

Maybe not the best Christmas present you have ever received. Especially now the surprise has been ruined by those pesky people who insist on peeking inside the wrapping and telling you what you are getting.