‘Energy bills cap not a guarantee of end to yearly price rises’ – May
THERESA May has said she cannot promise that her planned cap on energy bills will guarantee prices do not “go up year on year”.
But she said that the flagship election pledge, unveiled as she toured target seats in Yorkshire, would prevent “sudden and unexpected and significant” jumps in the price of gas and electricity.
The Prime Minister has said 17 million households will benefit by up to £100 from the cap on poor value standard variable tariffs (SVTs). And she dismissed suggestions that it was a repeat of an energy price freeze dismissed as “Marxist” by David Cameron when it was proposed by Ed Miliband in 2015.
But Labour said there was no guarantee that the cap would stop energy prices going up next year, while energy companies said the move would distort the market and undermine moves to improve choice.
Answering questions during a visit to a factory in Leeds, Mrs May was asked by one worker whether the cap would be set at a level which ensured prices did not go up for consumers.
She replied: “I don’t think any government can ever promise that no bill is going to go up year on year.
“But what we want to make sure is that in relation to energy it will be determined by an independent regulator, it will be making sure that there are not these sudden and unexpected and significant hikes in prices.”
Speaking earlier to Conservative General Election candidates in York, Mrs May said that last year’s investigation by the Competition and Markets Authority had shown consumers were spending £1.4 billion a year more than they would in a truly competitive market.
“I think it’s right, as does everyone sitting around the Cabinet table, for government to take action to support working families,” said the Prime Minister.
“What we are talking about is a cap on energy prices that will be set by an independent regulator and that will be a reflection of the market. Crucially, it will be possible for that cap to move, and the independent regulator will set it.
“The key thing is that people are clearly paying too much for their energy bills today. Too many ordinary working families, too many vulnerable people, find themselves on tariffs that are above what they should be paying, and that’s why we are taking action.”
Mrs May insisted her plan was different from the energy freeze proposed by Labour in 2015, which led Mr Cameron to accuse Mr Miliband of wanting to live in a “Marxist universe”.
Asked if she was herself now living in a Marxist universe, she replied: “No. First of all, we are Conservatives. We believe in free markets and competition, but we want to see competition working...
“Ed Miliband didn’t suggest a cap on energy prices. Ed Miliband suggested a freeze on energy prices which would have frozen them so that people paying above the odds would have continued paying above the odds, and crucially the prices would not have gone down. Under our cap prices will be able to come down.”
Lawrence Slade, chief executive of Energy UK, said that Mrs May’s announcement “effectively risks giving up on competition at a time when we need engaged consumers more than ever”.
“Change is happening at a rapid pace in the energy sector, with everincreasing levels of engagement, more choice and improving customer service,” he said. “Further intervention risks undermining so many of the positive changes we are seeing in the market which are delivering benefits for consumers.”
Richard Neudegg, head of regulation at price comparison site uSwitch.com, said a price cap was a “red herring” which would “kill competition, push up energy prices and leave consumers worse off”.
Josh Hardie, deputy director general of the CBI, said that, before intervening in the market, the Government should implement recommendations from the CMA to encourage customers to switch supplier.
“A major market intervention, such as a price cap, could lead to unintended consequences, for example dampening consumers’ desire to find the best deal on the market and hitting investor confidence,” warned Mr Hardie.
Mr Miliband suggested in a tweet directed at Business Secretary Greg Clark that the Tory scheme would still allow prices to rise: “As far as I can tell, no guarantee that energy prices won’t rise next year under Tory policy. Is that right? Asking for a friend.”
Labour’s shadow business secretary Rebecca Long-Bailey said the Conservatives had still not provided any proper detail as to how the cap would work.
“A cap suggests a maximum amount that can be charged, not a promise that bills won’t go up yearon-year,” she said.
Mr Clark - who admitted he had never himself switched suppliers, as consumers are advised - said that the policy was “entirely in keeping with the Conservative tradition”, while Labour’s “crude” version would have involved politicians intervening directly to set tariffs.
But Liberal Democrat leader Tim Farron branded the Tory plan a “gimmick”.
He said: “Let’s remember what this will mean, the reality is energy prices will go up before this happens, it will mean bad news for the small providers.
“The way to get energy prices down is to invest in widening the markets, so you have to get more small players, more competition.”
Meanwhile, business leaders warned small firms would suffer unless they were included in the cap.
Mike Cherry, national chairman of the Federation of Small Businesses, said: “They would face a double whammy, as not only would they miss out on help with their bills, but their bills would rise to subsidise domestic consumers.”