Energy Price Freezes Have Nothing To Do With Labour’s Rash Rhetoric

Richard Elliott December 2, 2013 1
Energy Price Freezes Have Nothing To Do With Labour’s Rash Rhetoric

This morning, NPower, one of the now infamous ‘big six’ energy companies at work in Britain, announced that it would not be raising its bill prices until Spring 2015. To add to that, British Gas have pledged that from the beginning of next year the average dual fuel bill will receive a cut of approximately £53 annually. The companies in question thus far have publicly stated that this reduction in prices directly reflects the removal of taxes on trade implemented by the government known as ‘green levies’. It would not be surprising if many other energy companies followed suit.

It is first worth consideration that it is a little disingenuous to call these cuts in bill prices “freezes”. Firstly, a price freeze, as a concept, is economically impossible to guarantee. Secondly, if enforced militantly they will always run the risk, as they so often did in the 1970’s, of a complete shutdown of power due to regulation of energy usage. The announcements today to reduce prices are cuts in the most direct sense of the term.

What it is not disingenuous to say, however, is that one can expect proclamations of a political victory from Labour here. Since Ed Milliband’s speech at the Labour Conference this year where he laid out his case for price freezes on big energy companies, the biggest debate in politics has been the cost of energy. In this respect, Labour have assumed a monopoly on the debate; a ‘we raised this problem first, we have the moral high ground here’ mentality.

So what may well happen is that this ‘freeze’ in prices will be explained back to Ed Milliband’s wobbly threats to cap energy companies. But that is not really a fair premise, nor is it a political point that would survive much scrutiny. In fact, it only the resentment raised by the vox populai that has led to government reduction in taxing energy companies. What has really happened here is not government implementation of more of itself onto energy companies, but getting out of the way so the market can function for cheaper, and more efficiently.

For once, the Tories are giving a little more room to the free market. That is to say, the lifting of economic restrictions on companies to provide cheaper energy to consumers will do things for society’s poorest that Ed Milliband wouldn’t dream of doing; namely, giving them a fair chance to keep themselves warm whilst not resorting to hitting the pockets of other, slightly richer consumers.

It would be crazy, from a business perspective, for the other energy companies to not follow suit with reductions. As we watch this play out, keep in mind the notion that, as libertarians and fiscal conservatives have been saying all along, it is only through laissez-faire that companies and big businesses are forced to genuinely compete for the custom of the consumer. It’s time all parties took heed of this.

Reddit this article ↓

  • Daniel Pryor

    Great article Richard. I wonder if Labour – the apparent party of the downtrodden – will welcome the reduction in green levies. Something tells me not; after all, we should only help people heat their homes if it’s through more government intervention. Helping the poorest through implementing free market policies would of course be unthinkable.

twitter