Domestic Gas and Electricity (Tariff Cap) Bill - Second Reading

Part of the debate – in the House of Lords at 4:25 pm on 22 May 2018.

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Photo of Viscount Ridley Viscount Ridley Conservative 4:25, 22 May 2018

My Lords, I fear that the Bill is flawed. I accept that we may need to tackle the “tease and squeeze” culture and that this is a manifesto commitment, but price capping and rent controls often turn out to be ineffective or even counterproductive, especially with respect to the most vulnerable. They tend to treat symptoms rather than causes and in this case I fear that they pass the blame for energy costs from the Government to scapegoats.

The pachyderm in the parlour here is that the costs of government policies vastly exceed any aggregate saving to the consumer that might come about from a price cap. Policies deliberately introduced, mainly under the coalition Government, with the full knowledge that they would push up energy prices are now coming home to roost. Telling the industry to cap prices is like fattening a pig and then demanding that it weigh less. Like worrying that in crossing the Rubicon Julius Caesar might get his feet wet, it lacks a sense of proportion.

Even if we restrict ourselves to the official data from the Office for Budget Responsibility by consulting its Economic and Fiscal Outlook from March 2018 and go to tab 2.7 of its spreadsheet, “Fiscal supplementary tables: receipts and other”, we find that in the current year, 2018-19, environmental levies will cost £10.4 billion. That is more than seven times the “customer detriment” found by the Competition and Markets Authority inquiry on which the Government are relying. It is seven times as large as the sum that my noble friend the Minister described as huge. Subsidies to renewables account for £8.9 billion of that annual sum, or 86%.

The total cost of subsidies to renewables, according to the OBR, from the current year to 2022-23 is an almost unbelievable £52 billion, as the table that I referred to confirms. It is appropriate to look towards 2023 because, under the Bill, the price cap could be extended till then. Domestic households will pay for all of that £52 billion. About one-third of it, £17 billion, hits them directly in their electricity bills, but they will pay for the rest through increased cost of living. If a supermarket has to pay more to refrigerate milk, it must recover that cost at the check-out.

Remember: none of these subsidies for renewables is actually working very well. These technologies are not market ready; they are manifest failures, still begging for subsidy after decades of public largesse. As suggested by the Dieter Helm review, to which the noble Lord, Lord Stevenson of Balmacara, referred, we are not getting emissions reductions at a reasonable price.