Can Labour take the credit for falling energy bills?
Photo bySpark up the central heating and get the tumble dryer on: energy bills will fall by 7 per cent in July, when Ofgem will reduce its price cap by £129 a year for a typical household. This underlines why the cutting of the £200 Winter Fuel Allowance is such an odd point for Labour to be losing voters on. It had already lost 45 per cent of its value (in real terms) since it was introduced; most of the people receiving it didn't need it; and its impact on bills is small compared to wholesale prices. By July, the price cap will be £2,559 lower than it was in January 2023.
On the other hand, our government can't do much (in the short term) to change the wholesale price of energy, of which we are a net importer. This is why Keir Starmer has described the UK's new agreement with the EU this week as 'good for bills': less friction on imports of food could mean lower food bills, and a new relationship on energy might mean lower energy bills. Although on this second point, things are less certain.
At first glance, the most impactful part of the agreement seems to be the commitment to 'explore in detail' the idea that the UK could join the EU's internal electricity market. There is a clear relationship to bills here: since we left the EU, we've been disconnected from its trading platforms. This caused some inefficiency when electricity was traded between the EU and the UK, which did lead to slightly higher energy prices for us (by about two per cent). So it seems that undoing this would have the opposite effect: our electrons would rejoin the EU, French and Dutch electrons would come here for a summer – it would all be very 2015 inside the wires.
The snag is that we have already been trying to make this happen for nearly five years. The Trade and Cooperation Agreement the UK signed in December 2020 contains a commitment to find a way for the UK to trade energy as if it was in the EU's internal market. Efforts to make that happen have 'failed spectacularly', says Tom Edwards, principal modeller at the energy analyst Cornwall Insight.
The reason this has failed, says Edwards, is that the European energy market is highly interconnected; a central algorithm governs the way power flows across borders, and efficient scheduling of trades between countries is 'basically impossible' without joining the algorithm. Can we just sign up to the European algorithm? 'We can't take part in that algorithm,' Edwards told me; one of its core principles is that it is limited to members of the internal market. 'They'll never agree to let us be part of it if we don't agree to join the Customs Union.'
That sounds fairly unlikely. But as a consolation prize, we can definitely rejoin Europe's Emissions Trading Scheme (ETS). An ETS is a means for companies which emit a lot of carbon to buy carbon credits from other people who remove carbon. (A bit like if you burned down a library, but also paid for a new one – it would be fine and no one would mind, right?)
The only issue here is that leaving the EU actually made carbon credits cheaper in the UK, which has traded carbon at a lower price than Europe for the last five years. Rejoining Europe's ETS will mean European businesses can buy carbon credits from the UK again, which will push up the price of UK carbon credits. For a major emitter such as a gas power station, these credits are the second-biggest cost after fuel. This won't necessarily mean higher bills – the energy industry is actually in favour of it, because they're more worried about the extra costs of the EU's new cross-border carbon tax, and their position is that a bigger, more efficient market for carbon should help sort this out.
Subscribe to The New Statesman today from only £8.99 per month Subscribe
Again, there is not a huge amount that politics alone can do about the price of energy in the short term. In the long term there is a great deal politics can do (stimulate the production of lots of cheap new energy). But the wholesale price will remain in charge.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here
[See also: Inside the Conservative Party's existential spiral]
Related
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Guardian
31 minutes ago
- The Guardian
Thousands join anti-austerity march in London to protest against Labour's cuts
Thousands of people marched through central London on Saturday calling for an end to public service and welfare cuts, in the first big anti-austerity march under Keir Starmer's Labour government. The campaign group People's Assembly, which organised the demonstration, called on the government to 'tax the rich and their hidden wealth to fund public services'. The People's Assembly said it was bringing together trade unionists, health, disability, housing and welfare campaigners with community organisations under the slogan: No More Austerity 2.0. Writer Kate Hardie, 57, was among those marching to Whitehall. She had voted for Labour in every election since she was 18, including last year, but said she will no longer support the party under Starmer. 'I worry about the fact that this government is making cuts that are unnecessary. People are really suffering because of it,' she said. She has friends who are disabled, who were 'devastated' when cuts to personal independence payments (Pip) were announced. 'It isn't just about my friends, because if we only vote for the people that we know, we're in trouble,' she added. Hardie was also dismayed over the prime minister's widely criticised 'island of strangers' speech, which was likened to the rhetoric of Enoch Powell. 'There's the problem of cuts and a problem with rising hate in this country and around the world,' she said. 'It's not just financial, it's also ideological and about how we treat each other.' She thinks the government's current approach will bear little fruit electorally. 'Why would you go and see a tribute band if you can get the real thing? It's not gonna work, it's ridiculous.' Daniel Kebede, the general secretary of the National Education Union, said: 'People are very disappointed in this government. Whether it has been cuts to winter fuel, the two-child benefit cap still being in place, we haven't seen enough investment. 'We appreciate that the government have a tight fiscal window to operate in, but we think they need to tax the wealthy more and start investing in communities.' He said the 'commitment to roll out free school meals to all families in receipt of universal credit' was welcome but called on the government to 'go much further much faster because the only person who is benefiting from cuts to communities is Nigel Farage'. Holding a sign calling for landlords to be taxed – including herself, Corinne Richeux, 57, who runs an NGO based in China, said: 'I'm really worried about the state of the country and I don't think British people can take austerity any more. We need a real radical change of direction and we need to tax the rich to make it happen. 'I think that many rich people would support more taxation. I think it's cowardly of the Labour government to pander to the rich when the people are really struggling.' She said she 'was shocked when the first thing they did was to start slashing benefits'. 'I kind of hoped that he was keeping his cards close his chest and that he was planning on taxing the rich when he got into office. I wasn't expecting it to be quite so bad.' Labour-run councils were also a target of criticism. Helen Davies, 59, a social worker, chanted in support of bin workers in Birmingham, who have been striking since January. On central government, she said: 'It's not what we expect from a Labour government. The social inequalities are being driven harder, there has to be a positive alternative to that.'
Glasgow Times
an hour ago
- Glasgow Times
Dawn French apologises after ‘mocking tone' in video about Israel-Hamas conflict
The Vicar Of Dibley actress posted a video on social media this week in which she switched between her normal voice and a higher pitched voice. In the video about the conflict, she said: 'Complicated, no, but nuanced', adding: 'Bottom line is, no.' Then at one point she said in the higher pitched voice: 'Yeah, but you know they did a bad thing to us.' French has now posted a statement on X saying she has taken down the video and apologised, saying her intention was never 'to mock, or dismiss, or diminish the horror of what happened' on October 7 2023. The statement, posted on Saturday, says: 'Ok, it's important to address this. 'I posted a video in the style I've been using for social media in an effort to convey an important point. I clumsily used a mocking tone. 'My intention was NEVER to mock, or dismiss, or diminish the horror of what happened on 7 October 2023 and what continues to unfold from that brutal unthinkable, unforgivable, savage attack. 'My heart broke for the many innocent people and their families that were killed, tortured, r@ped and kidnapped. The fact that hostages are still held is utterly appalling. 'My intention was to mock and point the finger of shame at the behaviour of the cruel leaders on ALL sides of this atrocious war, who have continued to behave like the worst, dangerous, sickening bullies and seem to relish the tyrannical and childish oneupmanship of the violence. THEY were my target, but clearly I failed to do that, and that's on me. I apologise unreservedly. I'm particularly sorry that my disgust at Hamas didn't figure. It appeared one-sided, and that is wrong. 'I am a person, who like many others, is feeling increasingly helpless and hopeless as we witness the carnage and destruction worsen. The images of starving and wounded children have haunted me day and night. History has taught us never to stand by and allow this kind of inhumane violence to be wrought on anyone, especially innocent children. 'I have felt my silence is complicit or even somehow sanctioning. So in my small way I wanted to voice my desire to say NO – to BOTH sides – to any further violence. 'I hope you will understand my intention was not to offend, but clearly I have. For which I'm sorry and I have removed the video.'
Telegraph
an hour ago
- Telegraph
Starmer's immigration speech ‘fundamentally racist', says Diane Abbott
Diane Abbott has said Keir Starmer's speech about Britain becoming an 'island of strangers' was 'fundamentally racist'. Ms Abbott, the UK's first black woman MP, said she was 'very disturbed' by the Prime Minister's recent speech in which he said that mass immigration had done 'incalculable damage' to Britain. Speaking at a thousands-strong anti-austerity march in London on Saturday, Ms Abbott said: 'I was very disturbed to hear Keir Starmer on the subject of immigration. 'He talked about closing the book on a squalid chapter for our politics – immigrants represent a squalid chapter. 'He talked about how he thought immigration has done incalculable damage to this green and pleasant land, which, of course, is nonsense – immigrants built this land. 'And finally, he said we risk becoming an island of strangers. I thought that was a fundamentally racist thing to say. It is contrary to Britain's history. 'My parents came to this country in the 50s. They were not strangers. They helped to build this country.' The Prime Minister faced outrage from Left-wing critics who claimed the reference to an 'island of strangers' had been deliberately lifted from Enoch Powell's incendiary 1968 speech on immigration, known as the 'Rivers of Blood' speech. Ms Abbott, who has served as a Labour MP since 1987, also accused Sir Keir of aping Nigel Farage in order to turn around Labour's dire poll rating. She said: 'I think Keir Starmer is quite wrong to say that the way that you beat Reform is to copy Reform.' The Prime Minister delivered the speech last month while announcing a new programme of immigration restrictions. He has castigated record-breaking net migration numbers under the Conservative governments of Boris Johnson and Rishi Sunak as 'Britain's failed experiment in open borders'. The latest figures show that the net flow of people into Britain halved between 2023 and 2024. While Labour sought to take credit for the cut, former Conservative Home Secretary James Cleverly claimed his immigration rule changes were behind the sudden fall in numbers. Thousands of Left-wing demonstrators gathered in central London on Saturday to march against the Government's programme of spending cuts and welfare reform. The march was organised by The People's Assembly and featured representatives from the Green Party, the Rail, Maritime and Transport (RMT) union, the National Education Union (NEU) and the Revolutionary Communist Party (RCP) among other Left-wing groups. A spokesman for The People's Assembly slammed the Government's spending cuts and said: 'Real tough choices would be for a Labour government to tax the rich and their hidden wealth, to fund public services, fair pay, investment in communities and the NHS.' The Prime Minister is facing increasing pressure from his Left flank to change direction. He has now announced a U-turn on a cut to winter fuel allowance, which removed the benefit payment from 10 million pensioners. A major change to the two-child benefit cap is also expected after concerns that it increases child poverty. But senior Left-wingers have urged Sir Keir to go further. Splits over economic policy A secret memo from Angela Rayner, the Deputy Prime Minister, to Rachel Reeves, uncovered by The Telegraph, has also shown the splits over economic policy at the top of Government. In the memo, sent before the Spring Statement, Ms Rayner urged the Chancellor to raise taxes rather than cut spending to plug fiscal holes. Ms Abbott had the whip withdrawn in 2023 after sending a letter to the Observer, for which she later apologised, arguing Jews could suffer prejudice but not racism. In the run-up to the last general election, Ms Abbott was readmitted to the party, but there was rampant speculation that she would not be allowed to stand again as a Labour candidate in her Hackney North and Stoke Newington seat. After political pressure, Sir Keir said that she was 'free to stand' in the seat if she wished. She now sits as Mother of the House, the longest continuously serving woman MP in the House of Commons.
