Coalition row over future of green energy levies

Vince Cable confirmed that arguments over subsidies for renewable energy were raging. Picture: Robert Perry

Mr Cable confirmed that arguments over subsidies for renewable energy were raging, with Liberal Democrat ministers fighting pressure from Conservative colleagues to shift focus away from carbon-reduction commitments.

The row emerged as a spokesman for the Prime Minister indicated the levies were under review, with the government looking “across the board” at ways to reduce pressure on household finances.

He said Mr Cameron was clear the measures, aimed at boosting renewable energy production, “shouldn’t be there for a second longer than they need to”.

Mr Cable’s comments came as the chief executive of energy company SSE, which has raised its prices by 8.2 per cent, called for a debate on the “green agenda”, which he claims will lead to more bill hikes in the future.

Alistair Phillips-Davies said SSE’s price rise, which will push a typical dual-fuel customer bill up by £106, would be “helpful” if it focused the nation on its spending priorities.

SSE believes bills would fall by £110 per household overnight if the government covered green energy subsidies and the cost of other schemes, such as free loft insulation, through the tax  system.

Mr Phillips-Davies said: “A price rise is never a good thing to do, but if it focuses everyone on to a debate about what we as a nation should be spending money on, then in one way it will be helpful.

“We need to think about what people really want to pay for. Maybe it’s time to retreat from decarbonisation and focus more on the cost of living. I think we have to have a debate about it.

“Do we want to be replacing one bit of [energy] generation that we can keep going for a bit longer with a new bit of generation that’s going to cost more?”

He added: “I doubt the public like price increases of this magnitude, but if we carry on firmly behind the green agenda, we will continue to have price increases like this.”

But Mr Cable insisted that the consumer will gain in the long run from investment in renewable energy sources, and denied green policies were a major factor in pushing up prices.

He said: “The rise in energy prices is due to a whole variety of things, by far the most important of which is what’s happening in world energy markets.

“We’ve had, over a period of years, very rapidly rising demand in Asia, particularly in China. We’ve had restrictions on supply from countries like Iran. A combination of these things has pushed up oil and gas prices and that is what has fed through to consumers.

“What we shouldn’t be doing is scrapping our environmental policies. That would be very short-sighted and foolish. In the long term, the costs of renewable energy will fall.”