MILIBAND’S BID TO FIX FUEL PRICE BLOWS UP IN HIS FACE

£2bn wiped off value of energy giants

ED MILIBAND was accused of ‘economic vandalism’ yesterday after his shock proposal to fix energy prices wiped almost £2billion from the value of Britain’s two largest power firms. The Labour leader faced a storm of criticism at his ‘insane’ plan to enforce price controls if he enters Downing Street.

A defiant Mr Miliband said it was possible that a government he led would also seek to control other markets, fuelling speculation that Labour might step in to regulate water, rail and petrol.

In a brutal backlash against his announcement, energy investors warned the 1970s- style policies would lead to economic shutdown.

Shares in British Gas owner Centrica and SSE – the only two ‘big six’ power giants on the London Stock Exchange – plunged by 5 per

cent, wiping £1.9billion from their combined value. More than 200 pensions and investment funds holding the life savings of millions of people across the UK are exposed to Centrica’s share price.

And the giant company warned ‘it would not be economically viable to continue’ supplying energy in Britain if prices were capped while costs were rising.

Critics said Mr Miliband had the chance to change the industry when he was Energy Secretary before the last election, but chose not to.

Official figures show that the largest rise in energy prices since 1997 was during the years when Mr Miliband had the job. A senior regulatory source said: ‘Miliband was presented with a plan in 2010, which aimed to secure the supply of affordable energy to British households – but he sat on it and did nothing.’

Centrica’s largest shareholder, Neil Woodford from Invesco, who controls the savings and pension i nvestments of millions, fiercely attacked the Labour leader.

He said: ‘This policy is economic vandalism at a time when this country needs all the help it can get. It is insane. If Centrica and SSE cannot make any money supply- ing electricity to the retail market then they won’t supply it. The lights will go off, the economy will shut down.’

One former Labour government minister warned Mr Miliband’s ‘socialist’ policies would push unemployment beyond three million. Digby Jones, who served as trade minister under Gordon Brown, said: ‘The sheer damage it will do to the economy does not bear thinking about. They are talking that this will be the end of the energy market – it’s far more dangerous. This is sheer, unbridled socialism. He is going to hijack the organs of management.’

The crossbench peer, a former head of business group the CBI, added: ‘I go around the world, banging the drum for Britain, trying to get companies to invest in Britain. Yesterday just made that a little more difficult. He i s going to sacrifice Britain’s prosperity on the altar of social tribalism.’

‘He is sacrificing prosperity’

Mr Miliband dismissed the idea that his party conference speech on Tuesday marked a shift to the Left, and rejected his ‘Red Ed’ nickname. ‘I’m One Nation Ed,’ he said. ‘I think what people are interested in is not labels, people are interested in how somebody’s going to tackle the problems in their life.’

Polls suggest that Mr Miliband’s confrontation with the energy firms could prove popular. A recent YouGov poll found that 38 per cent of Britons trusted energy companies less than the year before, and 76 per cent wanted government to do more to reduce energy prices.

In an open letter to the ‘big six’ energy companies, Mr Miliband said that the public had lost faith in them: ‘There is a crisis of confidence. We face a stark choice. We can work together on the basis of this price freeze to make the market work in the future. Or you can reinforce in the public mind that you are part of the problem not the solution.’

Mr Miliband conceded it was possible firms might try to increase bills just before the proposed price freeze kicked in, but warned them that would be against the law.

Energy analyst Peter Atherton from Liberum Capital told the Daily Mail: ‘This is a clarion call to disinvest from the UK energy sector. It’s a screaming headline that people should rush to pull their money out of Britain.

‘That’s why, in the 25 years since privatisation, no-one has gone near energy price controls.’

The move is also likely to breach EU rules and could be slapped down as illegal, he claimed.

Tony Cocker, the chief executive of E.on, wrote to Mr Miliband to say ‘at a stroke’ bills could be greatly reduced by funding green levies through general taxation rather than loading them on to households.

LYING in a quiet corner of Highgate cemetery, sheltered f r om t he r umbling North London traffic, there’s a plain grey gravestone. ‘Ralph Miliband’, says t he inscription. ‘ Writer Teacher Socialist.’

At his peak in the Sixties and Seventies, Ed Miliband’s father was one of the best-known intellectuals in Britain. A political theorist at the London School of Economics, he was a devout follower of Karl Marx and an unswerving believer in revolutionary socialism. So his final resting place, just 12 yards from Marx’s own grave, could hardly be more fitting.

As an unashamed apostle of the f ar Left, Mr Miliband senior was no great fan of the Labour Party, which was much too moderate for his taste. But I suspect he would have been r ather pleased with his son’s speech at the Labour conference on Monday afternoon.

Rotten

It is hard to remember the last time a Labour leader made such an unashamed pitch to his party’s Left. After all, can you imagine Tony Blair, or even Gordon Brown, promising to introduce price controls, ramp up taxes for the rich, and take privately owned l and i nto state ownership?

Yet as Mr Miliband toured TV studios yesterday in a bid to fend off the mounting criticism of his pledge to cap energy prices, he seemed remarkably untroubled by the furore. Perhaps he sensed that somewhere, i n some unearthly Marxist paradise, his father was nodding with approval.

Mr Miliband was not, of course, the only star of the Labour conference. He had to share top billing with his old comrade Damian McBride, whose explosive memoirs exposed the shamefully rotten underbelly of Gordon Brown’s court.

For me, however, the book’s most revealing passage is Mr McBride’s acute dissection of his old friend’s psychology. It is, he writes, ‘hard to listen to any of Ed Miliband’s occasionally tortured, over-academic speeches about New Labour’s record and his own political vision without hearing his father’s voice, especially when he talks about recasting the capitalist model’.

Indeed, Mr McBride even argues that it was Ed Miliband’s obsession with his father’s legacy that drove him to challenge his Blairite brother David for the Labour leadership.

There was more to i t, he suggests, than ordinary sibling rivalry. For winning the leaders hi p was Ed Mili band’s ‘ultimate tribute to his father’ — an attempt ‘ to achieve his father’s vision and ensure that David Mili band di d not traduce it’.

None of us, of course, can ever really know what is going on inside somebody else’s head, especially that of a politician steeped in the dark arts of spin and obfuscation. Even so, Mr McBride’s analysis of the Labour leader’s motives has the ring of truth.

What r eally matters to ordinary f amilies, t hough, i s not where Mr Miliband is coming from, but where he wants to take us. And on this evidence, his ideal society looks worryingly l i ke the seedy, shabby, downbeat world of Britain in the mid-1970s.

The last time a Labour leader went to the polls promising an explicit cap on prices was February 1974, when Harold Wilson squeaked home against the Tories’ Edward Heath.

At the time, Wilson had the most radical Lef t - wi n g manifesto in living memory, although it was later joined by Michael Foot’s notoriously unappealing ‘ suicide note’ manifesto in 1983.

Ironically, Wilson greatly disliked his own manifesto, which had been forced on him by the Labour Left. But on t he evidence of Monday’s speech, I s uspect his 21st- century successor would relish i ts enthusiasm for State intervention in the market economy.

Mr Miliband’s extraordinary promise to seize private land for development, for example, is pure Seventies s t at e socialism, reviving the 1974 manifesto’s pledge that ‘land required for development will be taken into public ownership, so that land is freely and cheaply available f or new houses, schools, hospitals and other purposes’.

His populist pledge to fix energy bills for two years also echoes the rhetoric of the 1970s. Indeed, Wilson’s manifesto went even further, promising to ‘introduce strict price control on key services and commodities’ — including food and energy.

Mr Miliband insists that he merely wants to cap energy prices, not all prices. But this rings false. Once the principle of State controls has been reestablished, why would you stop with energy? Why not target supermarkets, as you have taken aim at the power giants, and cap food prices too?

But the historical record of price controls does not make attractive reading.

When the state of California tried to fix energy prices in 2001, the result was a wave of shortages and blackouts. Lifts ground to a halt with passengers i nside, while parents packed their children off to school with blankets to keep them warm.

Failure

Britain’s history of price controls, meanwhile, is nothing short of disastrous. The controls of the mid-Seventies, which involved gigantic Pay Boards and Price Commissions that seemed like something from a Soviet tractor co- operative, proved a big economic failure.

Indeed, f ar f rom keeping i nf l ati on down, Wilson’s controls stoked it even higher. For as economists often point out, price controls are usually self- defeating, driving up demand and limiting supply.

‘If you want to create a shortage of tomatoes,’ the American economist Milton Friedman once explained, ‘just pass a law that retailers can’t sell tomatoes for more than two cents per pound. Instantly you’ll have a tomato shortage. It’s the same with oil or gas.’

Even worse was the fact that, like Mr Miliband, Wilson made no corresponding pledge to keep down workers’ pay. Inflation promptly s hot through the roof, and within a year it had reached a post-war record of 26 per cent, driving down living standards for millions of ordinary families.

Given that most older voters remember those years of strikes and blackouts with a shudder, it is baffling that Mr Miliband is so keen to resurrect the values of the Seventies.

The truth, I suspect, is that he sees nothing wrong with the prospect of massive state intervention in the economy. Too young to remember properly the three- day week and the Winter of Discontent, he has made it his mission to roll back Thatcherism, just as his Marxist father would have wanted.

Cynical

There is, of course, a more cynical interpretation of all this, which holds that Mr Miliband was making a ruthlessly populist bid to win the votes of hard-pressed households in Middle Britain. But I think he was being completely sincere.

I think what we saw on Monday was the real Ed Miliband, the idealistic son of a North London Marxist who believes there is no problem that state intervention cannot fix. He may joke about his Red Ed nickname, but deep down, I suspect he rather likes it.

No wonder, then, that Leftwing activists were so thrilled with his speech. And no wonder it drew such applause from the hard- Left union boss Len McCluskey, who hailed Mr Miliband’s ‘courageous vision’.

Whether the British people will be quite so impressed is another matter. Bad memories of the Seventies run deep, and I find it hard to believe that many ordinary voters are itching for a re- run of the decade that fashion and economics forgot.

Still, at least nobody can claim that there is nothing to choose between the parties, or that they do not know where Mr Miliband stands.

Indeed, when a supporter asked at the weekend, ‘When are you going to bring back socialism?’, the Labour leader’s reply spoke volumes. ‘That’s what we are trying to do, sir,’ he said.