Energy firms have us all over a barrel – the next PM needs to wield the stick to keep the lights on

ASpeCTRe is haunting the Conservative leadership election – the spectre of socialism. The Tories can’t stop seeing reds under the beds or, more alarmingly, around the Cabinet table.

Jacob Rees-Mogg, a supporter of liz Truss, has chided Rishi Sunak for ‘raising the tax burden to the highest since the socialism of 1950s labour’.

The former Chancellor hit back by accusing his rival of pursuing ‘socialism’ through her tax plans. This prompted the Times to ask liz Truss if she was a socialist, something she denied and a sentence I never expected to write.

A senior Tory then briefed the financial Times that grassroots members believed Sunak was ‘pursuing socialist tax policies’. Very uncomradely behaviour.

Truss and Sunak should sit down with some of the Tories I’m acquainted with and ask them their number one concern. What worries them is the rocketing cost of household fuel and whether they will be able to heat their homes this winter.

Ransom

If it’s socialism you’re anxious about, try broaching the subject of the energy giants, their gargantuan profits and how their greed has turned the average utility bill into a ransom note with a customer service hotline. That is when you’ll hear these true-blue, up-by-their-bootstraps, Maggie-was-a-good-’un Tories express views about corporate profiteering that would make lenin blanch.

perhaps they are unusual or unrepresentative but I don’t think so. Whether it’s Conservative party members, to whom the final two candidates must pitch themselves, or supporters of all parties and none, to whom the eventual winner will have to pitch for a fifth consecutive Tory victory, the great mass of ordinary people out there are struggling.

They do not expect the next prime Minister to make all their problems go away, but they do expect her or him to know how tight things are getting and to have an idea of how to cut cash-strapped families a little slack.

Their expectations – and their fears – will only have been heightened by reports that household gas and electricity bills could reach £500 per month this winter.

earlier this year, the annual bill for standard tariff users increased to just under £2,000. In May, regulator ofgem forecast a further rise of £800 per year for the average family when the energy price cap is reviewed in october.

Now consultancy Bfy is warning customers to brace themselves for higher increases, with utilities analysts predicting a jump to £3,420 annually in october and then to £3,850 next January. Industry expert Cornwall Insight is estimating a price cap rise to £3,500 in october.

Happily, news of our impending trip to the poor house coincided with a more upbeat item. Centrica, owner of British Gas, has posted half-year profits of £1.34billion, a five-fold rise on the same time last year. Shell’s profits for the first quarter of the year rang in at £9billion.

you need not be a socialist to see this for what it is: a racket. Gas producers hike their prices, the regulator lifts the energy cap, utilities companies put bills up, the cap is lifted again and the whole cycle repeats. everyone makes a quid at the expense of bill payers. They put Ronnie Biggs in Belmarsh for less.

Customers are at the mercy of utilities firms, who know they can put up their prices without fear of customers switching en masse to another supplier because the other suppliers are doing the same.

families will head into winter knowing their bills are going to soar but not knowing where they are going to find the money to pay them. This winter could be the first time in generations that the average household in Britain regards heating the family home as a luxury.

This must be a priority for Boris Johnson’s successor. There are other priorities – ukraine, national security, the union – but nothing hits punters’ pockets more painfully or does more to reduce their quality of life.

Nothing would send a more emphatic measure that the Government is on their side than if the next prime Minister took rising energy prices head on.

There are two fronts on which this battle must be waged. The first is against the energy and utilities companies and the occupant of Number 10 will have to go toe-to-toe with them like Margaret Thatcher did the militant unions or Tony Blair the opponents of health and education reform.

one route the next prime Minister could go down is that of scrapping VAT on energy bills. This approach has been in the news after Rishi Sunak, who formerly opposed such a move, u-turned and pledged to cut tax on household fuel from 5 per cent to zero. It is estimated this would save every household £160.

However, it would involve giving the same support to wealthier families who own larger houses and use more energy as the poor and the struggling middle class.

A fairer tack would be to leave VAT where it is and instead make cash transfers to those on low and low-middle incomes to offset some of their bill rises.

The drawback here is that it would still be a very modest intervention and would only make a minor dent in the added financial burdens coming down the line.

The most effective way to keep the hikes to a minimum is to cut a deal with gas providers and domestic energy suppliers. The former will agree to sell to the latter at a reasonable price and the latter will agree to sell it to their customers on the same terms. Both sectors will still make handsome profits but households will see more manageable bills.

The carrot the Government can wield is the promise of tax relief. The stick is the threat of another windfall tax, one dwarfing the £5billion levy imposed on oil and gas producers earlier this year. The revenue generated by such a tax could be passed on to customers. prime Minister Truss or Sunak should speak plainly with these two industries: do the right thing or the Treasury will do it for you.

Cowardice

The second front may be even more daunting but it too must be fought with determination until victory. That is stepping up civil nuclear power and embracing the opportunities of shale gas.

In each case, had Britain increased its capacity in these areas before now, energy providers would not have us over a barrel and household bills would not be what they are today. Instead, successive governments have caved to regressive greens and Nimbys. We are all paying the price today for that political cowardice.

upscaling nuclear and initiating shale exploration would guarantee us a much greater degree of energy security in the future. Britain would be less vulnerable to energy market shocks like those delivered by the pandemic, the invasion of ukraine and Russia’s gasmailing of european nations. The prime Minister would have to combat various special interests and be prepared to overrule the devolved administrations, but it would be a battle worth winning for our economy, security and quality of life.

This is what the Tory leadership contenders should be talking about. No one seriously thinks either is a socialist and, more to the point, labour doesn’t look or sound much like a socialist party these days. The ideological clashes of the past belong there and cosplaying them all over again in an internal leadership race is an indulgence the country can ill afford.

The longer it takes the Tories to put the problems of everyday people front and centre, the likelier it is they’ll look not to socialism but to Sir Keir Starmer.