Matthew Sinclair

Huhne, the Lib Dems’ black comedian

Huhne, the Lib Dems' black comedian
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Today we got the black comedy follow up to Sarah Teather’s stand-up routine.  Chris Huhne is going to drive down our energy bills! For those of us wondering how families and businesses can afford his expensive climate policies, it is a bit of a joke.

The basic issue – as I set out in the new book Let them eat carbon – is that we need to invest an absolute fortune to meet the range of environmental targets that the government has put in place. Citigroup estimated last September that we need to invest about €229 billion (about £200 billion) in the energy sector this decade.  That is far more than any other major European economy.  We have a particularly ambitious renewable energy target and are relying on a particularly expensive and unreliable source to meet it – offshore wind.

Paying for that investment will require energy companies to make more profit and push up electricity prices by 52 per cent – again these are Citigroup’s estimates.  And you can’t offset all that with improved efficiency.  They think even with an impressive saving in gas demand there would still be a 35 per cent real terms rise in dual fuel bills, even before we pay for all the insulation work that would require.

By contrast, if politicians hadn’t decided that we needed to make a rapid transition to renewable energy then we would be in a pretty good position, with a fairly young generation fleet and well-maintained networks meaning we don’t need to spend too much to keep the lights on.

Switching from one company to another might be a good idea for individual consumers right now.  But it won’t change the fundamentals.  Unless we start junking some of the current targets, consumers will have to pay a lot more for their energy.

Politicians engage in these farcical attacks on energy companies – at the same time as they implement legislation that will boost those firms’ profits – as a way of ducking responsibility for the consequences of their policies.  Ministers set themselves up as the consumers’ champion against the excesses of the “big six”.  They even set up an entire quango – the useless Energywatch, now merged into Consumer Focus – to help spread that message.

The only reason those companies actually do deserve our ire is that they have been lobbying for many of these policies.  For example, EDF put a huge amount of work into securing the carbon floor price which will hand them a hefty windfall profit while doing nothing for the climate as – in the IPPR’s words – “every ton of carbon that is priced out of the UK will be emitted elsewhere in Europe”.

The industry has too often epitomised the crony capitalism that is destroying British confidence in free markets.  Their plan seems to be that if they deliver the investment needed they will get political cover for rising profits, so long as they hug the politicians close.

That strategy is proving a dismal failure, and the performance of European utility shares has been torrid.  Faced with rising prices and rising profits, politicians will “get tough” whether that means rhetoric and new powers for Ofgem – as Chris Huhne has proposed – or something stronger like a windfall tax.  Around Europe other governments are cutting subsidies or imposing special taxes on the sector.

Draconian climate regulations are offering very poor value, as I set out for this site at the end of last week.  British families and businesses are suffering to little end.  Insisting that we have to act to cut our less than two per cent of global emissions now and switch to much more expensive sources of energy immediately is pure vanity when the major emitters aren’t going to do the same.  We could make a much more useful contribution by focusing on funding research and development.

We need to heckle Chris Huhne with the facts until he puts down the microphone and let Sarah Teather or Lembit Opik retake the position of Liberal Democrat comedian-in-chief.  He is no crusader against high energy bills, and we’ll all pay the price for years if we let him lock in high prices with expensive regulations.

Matthew Sinclair is Director of the Taxpayers' Alliance.