Jeff Salway: Cameron’s utterances on energy too clueless even for a TV sitcom
David Cameron’s clueless attempt to set out policy on energy bills last Wednesday was mocked by opponents for being akin to a scene from TV series The Thick Of It.
A line from an older political satire, Yes Minister, also came to mind. “The Law of Inverse Relevance”, explained Sir Arnold Robinson, cabinet secretary before Sir Humphrey, means that “the less you intend doing about something the more you have to keep talking about it”.
Energy bills certainly belong in that category under the coalition government, given the stark disconnect between intentions and actions.
The Prime Minister managed on Wednesday to come up with a proposal that would have skewed the household energy market even more in favour of suppliers. Inevitably – but thankfully in this case – it will never see the light of day.
His suggestion that suppliers should be made to put all customers on their lowest tariff was so short-sighted and economically illiterate that it would have been dismissed by the writers of The Thick Of It as stupid beyond credibility. It is quite clear that when faced with such a threat, suppliers would merely make their cheapest tariffs more expensive, raising the average energy bill in the process.
Cameron’s brag that he would make sure customers are given the lowest available tariff may be true in one sense – if the measures went ahead – it is just that the lowest available tariff would be much more expensive than the cheapest option now.
The recent history of political intervention in the energy market is not a proud one. For all the huffing and puffing, successive British and Scottish administrations have failed to address the biggest issue – competition.
Ed Miliband, as energy minister in the Labour government, proposed making suppliers put pensioners on their cheapest tariff. A logical idea that little has been heard about since.
In Scotland, the big six suppliers were asked in Holyrood last summer to explain their most recent price rises. That made MSPs feel better no doubt, but nothing material came of it.
A year ago, UK ministers met with suppliers and consumer groups to look at ways to help energy customers and introduce greater competition in the market. Again, the right noises, but no action on those concerns.
There have been some improvements. Ofgem, the energy regulator, has made progress in clarifying tariffs, thus making it easier for households to compare and switch.
Its latest proposals – that suppliers must show their cheapest tariffs on bills and move customers on to their cheapest deal when fixed-rate terms come to an end – are eminently sensible.
But the market still isn’t functioning in the correct manner. Similar issues are evident in the savings, current account and certain insurance markets, where too little competition has helped providers fatten margins at the expense of consumers.
It is time instead for a full inquiry into a market, where suppliers are forced to set out how they calculate their costs and their bills, and why there continues to be apparent collusion between the big six.
Why are the increases so similar when the prices they pay for wholesale supplies vary? Why are falls in wholesale gas prices not reflected in household bills to the same extent as increases?
And how about doing more to help new entrants? Suppliers such as First:Utility and Ovo already offer some of the most competitive online deals and should be given more support to break into the mainstream.
Judging by this government’s incompetent and timid response to the latest price increases, however, suppliers have little to worry about.
• WEDNESDAY’S papers told us that hundreds of thousands of disabled people and their families will lose out under the government’s proposed universal credit.
Many are also seeing benefits cut or lost through the quest for a 20 per cent reduction in benefits paid to the disabled, even when the government’s own figures put disability benefit fraud at just 0.5 per cent.
Also in Wednesday’s papers was the sorry tale of Starbucks, alleged to have paid just £8.6 million in corporation tax since its first UK outlets opened 14 years ago. Vodafone, Goldman Sachs and Google are among the numerous other household names to have avoided paying billions of pounds in tax in Britain, some with the help of HM Revenue & Customs (HMRC).
The Revenue falls back on the excuse that complex international tax law means companies not paying their fair share in the UK does not necessarily equate to tax avoidance.
Which is handy, because if the government and HMRC were to take a harder line they might scare some of those firms away.
It is obviously far easier, clearly, for them to turn a blind eye to corporate tax avoidance and instead squeeze disabled families for all they are worth.
Search for a job
Search for a car
Search for a house
Weather for Edinburgh
Monday 20 May 2013
Temperature: 8 C to 21 C
Wind Speed: 9 mph
Wind direction: South
Temperature: 6 C to 16 C
Wind Speed: 13 mph
Wind direction: North west