PM’s ‘Marx­ist’ en­ergy cap could see bills rise, say rebels

Daily Mail - - News - By John Stevens Deputy Po­lit­i­cal Ed­i­tor j.stevens@dai­ly­

THERESA May’s plan to cap en­ergy bills ran into trou­ble last night as Tory MPs ac­cused her of liv­ing in a ‘Marx­ist uni­verse’ and warned some house­holds could ac­tu­ally see their prices rise.

Min­is­ters un­veiled leg­is­la­tion yes­ter­day that will give reg­u­la­tors the power to set max­i­mum gas and elec­tric­ity prices for 18mil­lion house­holds on stan­dard vari­able tar­iffs (SVTs).

Busi­ness Sec­re­tary Greg Clark said the cap, which will not come into force un­til next year, would run ini­tially un­til the end of 2020, but would be kept un­der review with ex­ten­sions pos­si­ble un­til the end of 2023.

How­ever, Tory back­benchers warned the move could lead to en­ergy firms charg­ing all cus­tomers the max­i­mum price – in the same way as uni­ver­si­ties set tuition fees.

For­mer min­is­ter Sir Des­mond Swayne told the Com­mons: ‘I want to es­cape this Marx­ist uni­verse. We cap univer­sity fees and, lo and be­hold, all the uni­ver­si­ties charge the max­i­mum.’

Fel­low Tory MP Robert Jen­rick added: ‘I’m nat­u­rally sus­pi­cious of caps, par­tic­u­larly be­ing in­tro­duced by a Con­ser­va­tive gov­ern­ment.

‘But would the Sec­re­tary of State be able to re­as­sure me... that ac­tu­ally what the en­ergy com­pa­nies won’t do is just bunch up all of the prices around the cap.

‘And that what lit­tle com­pe­ti­tion, im­per­fect com­pe­ti­tion, that we see in the en­ergy mar­ket to­day won’t be fur­ther eroded and more cus­tomers put off from switch­ing in the com­pla­cent, mis­taken be­lief that they’re go­ing to get the best price thanks to gov­ern­ment in­ter­ven­tion?’

Mr Clark told MPs the Gov- ern­ment wanted to cre­ate more com­pe­ti­tion in the mar­ket, while pro­tect­ing those on stan­dard vari­able tar­iffs. He ar­gued that sup­pli­ers would still be able to of­fer at­trac­tive deals in the com­pet­i­tive side of the mar­ket.

But ex­perts raised con­cerns about how the move could dis­tort the mar­ket. Ju­lian Jes­sop, chief econ­o­mist at the In­sti­tute of Eco­nomic Af­fairs, warned the in­tro­duc­tion of the cap risked that ‘con­sumers end up pay­ing more than they would oth­er­wise have done’. He added: ‘Given the cap is un­likely to be in­tro­duced un­til next year, sup­pli­ers could sim­ply raise prices in the mean­time.

‘What’s more, be­cause the cap will only ap­ply to stan­dard rates, sup­pli­ers are likely to in­crease their dis­counted prices, or with­draw spe­cial deals al­to­gether.’

Tory MP John Pen­rose, who has led the cam­paign for ac­tion, said min­is­ters should in­stead have in­tro­duced a rel­a­tive cap where SVTs are linked to the prices of the best deals on the mar­ket.

He said: ‘An ab­so­lute cap would throt­tle com­pe­ti­tion, be out of date as soon as the whole­sale price of gas goes up or down, and en­ergy firms would spend more time lunch­ing their reg­u­la­tors than de­light­ing their cus­tomers.’

The Prime Min­is­ter re­vived the plan for a price cap last week fol­low­ing pres­sure from dozens of her MPs. It was a flag­ship pol­icy in the Tory man­i­festo in June but did not ap­pear in the Queen’s Speech after the elec­tion, spark­ing claims it had been ditched.

After 72 Tory MPs backed a cross-party call for Mrs May to hon­our her pledge to cap bills, the plan was re­an­nounced in last week’s con­fer­ence speech. Stan­dard vari- able tar­iffs tend to be much more ex­pen­sive than con­tracts that cus­tomers can get by shop­ping around. Many house­holds are pushed on to them when their fixed-term deals come to an end.

Ed Miliband, who backed a price cap as Labour leader, yes­ter­day mocked the Gov­ern­ment for adopt­ing his pol­icy. He told Mr Clark: ‘Given that this pol­icy was once de­scribed from that despatch box as a con, a joke, dis­as­trous and liv­ing in a Marx­ist uni­verse, it would be churl­ish not to wel­come his con­ver­sion to it to­day.

‘Well done – he’s very wel­come to the party. How­ever, I still think that his voy­age into the Marx­ist uni­verse is a bit slow, if I can put it this way.

‘Be­cause it’s a draft Bill, it’s four months since the gen­eral elec­tion, he’s said there would be help this win­ter, he could have cho­sen to fast-track this with the front­bench, and get the help in now.’

‘Throt­tle com­pe­ti­tion’

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