Election 2017

Energy bills: £100 cap plan defended by Theresa May

Woman turning oven on Image copyright Getty Images
Image caption The Conservatives say customers are being overcharged by £1.4bn a year

Theresa May has denied that her plans for a cap on "rip-off" energy prices are a repeat of an old Labour policy derided by David Cameron as "Marxist".

The prime minister said 17m households would benefit by up to £100 from the cap on poor value standard variable tariffs.

Industry figures have criticised the plan, first announced last month, saying it could lead to higher prices.

Labour said there was no guarantee the cap would stop energy prices going up.

And the SNP described the proposal as an "election bribe" - while former Lib Dem energy secretary Sir Ed Davey said voters would be "astonished" the Conservatives were "copying" a policy proposed by former Labour leader Ed Miliband at the 2015 election.

At an election event in York, Mrs May insisted her plan was different from the 20-month 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....Under our cap prices will be able to come down."

Speaking later to factory workers in Leeds, she said the potential saving would make a real difference to people.

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Media captionTheresa May: Doing what's right, not ideology, is what matters

"Sometimes people say to me that doing something like that doesn't sound very Conservative. But actually my response to that is when it comes to looking at supporting working people what matters is not an ideology, what matters is doing what you believe to be right."

Under the Conservative proposal, industry watchdog Ofgem would set a ceiling on default standard variable tariffs. These rates are used by seven out of 10 households and are often criticised as bad deals by industry watchdogs.

"Like millions of working families, I am fed up with rip-off energy prices," she wrote in The Sun. "Gas and electricity bills only ever seem to go in one direction, eating up more and more of your monthly pay packet."

The prime minister said five of the "big six" energy companies had recently raised prices while their profit margins hit "record levels".

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Media captionLawrence Slade, CEO of Energy UK, on energy tariff cap proposed in the Tory manifesto

Business Secretary Greg Clark - who admitted he had never himself switched suppliers because it was "a hassle"- 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.

Martin Lewis, from Moneysavingexpert.com, described Mr Clark as "an absolute disgrace" for saying "he'd never switched because it was too much of a hassle".

"He should have the energy portfolio taken off him. He's not responsible," he told BBC Radio 4's World at One.


Analysis

Image copyright PinkBadger

By Laura Kuenssberg, political editor

I understand ministers had not originally intended to go ahead with a full cap when the PM first gave her hint in the autumn. There was an element of wait and see.

One minister told me they hoped that they had put the firms on notice, and they would only crack on with a full cap if the "big six" continued with price rises.

That is, of course, precisely what happened.

Perhaps the energy firms even put up some bills in anticipation of the government acting. (Chicken and egg, would they have put up bills without the threat of a cap to keep bills down?)

In any case, the prime minister is pressing ahead with a policy that's more or less out of Labour's 2015 playbook that the Tories hope will appeal to voters across the board, even though it will rankle with some of their true believers.


Following a two-year investigation, the Competition and Markets Authority said last year that excess profits were largely being caused by inefficiency in the market and recommended a cap on pre-paid energy bills - a measure that was introduced last month.

It decided against extending this to all standard variable customers, saying this would "run excessive risks of undermining the competitive process".

Conservative sources have told the BBC there was opposition to the cap when it was discussed at cabinet, with Mr Clark among those expressing doubts.

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Media captionBusiness Secretary Greg Clark tells Today the energy tariff cap will safeguard vulnerable people

It is understood he favoured a "relative cap" that would allow energy companies more flexibility, but the prime minister was determined to press ahead with her plan for a fixed-price cap.

Former Conservative chancellor Lord Lawson has said the idea is "crazy" and the government should concentrate on reducing bills by sourcing more energy from the cheapest and most reliable technologies.

There is evidence that some suppliers have started raising the price of their cheapest offers in the past six months, but some in the industry put that down to rising wholesale costs rather than the threat of the cap.

Image copyright Science Photo Library
Image caption The cap would take into accounts wholesale energy prices and distribution costs

British Gas owner Centrica said it did not believe in "any form of price regulation", citing evidence from other countries that it pushed up average prices.

Energy UK, which represents the "big six" energy firms as well as smaller players, said five million people switched suppliers last year and people could save much more than £100 by visiting a price comparison website.

"I worry that all this competition that we are starting to see could go away, we have seen that in other markets," Energy UK chief executive Lawrence Slade told Radio 4's Today. "It risks investment and it does ultimately risk profit levels."

And the CBI urged the government to let existing changes in the market "bed-in" before intervening further.

According to Citizens Advice, about 800,000 of the poorest pensioners and 1.5 million low-income families with children are on standard variable tariffs.

These households are paying an average of £141 more a year for a dual fuel gas and electricity bill than if they were on the cheapest deal, it said.

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Ed Miliband said Mrs May was unable to answer the questions that had been put to him back in 2015.

"As far as I can tell, no guarantee that energy prices won't rise next year under Tory policy. Is that right?" he tweeted.

The SNP said the Conservatives had "failed to tackle fuel poverty" in the past seven years while unions said regulators must differentiate between profiteering and the resources needed to generate jobs and pay for infrastructure.

The main parties have yet to publish their full manifestos ahead of the 8 June general election.

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