How Ed Miliband can deliver cheaper energy bills, today
We need to get energy bills down, and fast. Above all else, how quickly we make these bills affordable is what will determine our success as a Labour government. Our work in expanding clean energy and insulating homes will get bills down for good, but these investments will take time while voters are, rightly, impatient for change. The good news is there are ways to get energy bills down now and for free.
We can do this by implementing a progressive pricing system. The simplest way is to abolish the standing charge – a flat fee paid by all of us regardless of the amount of energy used. Another is through a 'Rising Block Tariff', where an initial allowance of energy has a lower unit price and energy consumed above this allowance, a higher unit price. With extra exemptions also built in, this pricing system will lead to lower bills for low- and middle-income households and doesn't cost the taxpayer a penny.
Britain has some of the highest domestic energy bills in Europe and record numbers of people are struggling to pay them. The cost-of-living is still, by far, the most important issue for voters. Nine in ten people see reducing their energy bills as the best way of getting the cost-of-living down. They are right.
Making the bills affordable is why I, as a Labour MP, was elected. Our Labour values can be summed up as this: ensuring that every single person in this country can afford a good life. But with one-third of people unable to afford the basics and 3 million emergency food bank parcels being handed out every year, it's clear we are very far from that ideal. If we want a country where a good life is affordable, then we must get energy bills down.
Making life affordable was why over 100 MPs came together last week to form the Living Standards Coalition. We come from different traditions of the party, but we share common Labour values and the same overriding electoral imperative. Put bluntly, if we don't get bills down, we lose. Economically insecure voters are 50 per cent more likely to have left Labour. We need to get bills down fast to get these voters back and keep the likes of Nigel Farage out of power.
We are building the solar farms, wind turbines, and nuclear power stations that will get bills down for good. We are insulating 5 million homes. But all of these investments take time. People need relief from rising bills now. We have acted, expanding the Warm Homes Discount, which led to an immediate fall in bills for the six million lowest income households, but we can do more to get more peoples bills falling today.
There are ways to get bills down quickly and for free, by making the bills we pay more progressive. The simplest way is by abolishing the standing charge, and moving the costs on to each unit of energy consumed. The standing charge, paid by all of us regardless of the amount of energy used, has risen by 43 per cent since 2019. It is, in effect, a flat tax that hits low- and middle-income earners the hardest. Getting rid of this charge would mean that your energy bill is related to how much you use. It is progressive, puts more money into the pockets of low- and middle-income households, and is fiscally neutral.
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Another element of a progressive energy bills system is a Rising Block Tariff. Where currently all the energy we use has a flat price, the Rising Block Tariff introduces an initial allowance of energy usage that is priced at a lower tariff. Energy used above this allowance is priced at a higher tariff. Protections are then built in for vulnerable groups such as those on means-tested social security, children, and the disabled to protect poorer, high-energy households. As income is strongly correlated with energy use, it is low- and middle-income households that benefit the most.
A Rising Block Tariff is progressive, growth-enhancing, and fiscally neutral. It is progressive because it reduces costs for low- and middle-income households. It is growth-enhancing as it gets more money in the pocket of low- and middle-income families who will then spend more down the local shops and less on foreign gas imports. Crucially, this policy won't cost the Treasury a penny. It redistributes costs within the system.
Too many of us are struggling to pay the bills with little relief in sight. Getting to clean energy and insulating homes will get bills down for good, but after years of hard times, people are impatient. They want us to get bills down now. There is a way to do this. By introducing a progressive pricing system, we can reduce bills for low- and average-energy users. Changing to this pricing system would also boost growth, and doesn't cost the taxpayer a penny. These are policies that live up to our Labour values and will help us win the next election.
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