Sam Ashworth-Hayes Sam Ashworth-Hayes

The madness of Truss’s energy price cap

It’s going to cost hundreds of billions and make blackouts more likely

(Credit: Getty images)

While Boris Johnson used his farewell speech to praise the ‘vital symmetry between government action and free market capitalist private sector enterprise’, the formerly free market Liz Truss was busy briefing out price caps on energy. There are only three possible explanations for this sudden change of heart: No. 10 is haunted by the malign ghost of Clement Attlee, the building is riddled with lead piping, or the electoral incentives facing the Conservative party are so perverse that when push comes to shove, even free marketeers are willing to abandon the free market in the race to expropriate from the young to pay for the old.

Given that Truss has yet to officially enter her new residence, my money is on the last option. It’s hard to explain how else the party could see freezing household energy bills as a good idea: the government is about to spend a combined total of £170 billion on making sure we get blackouts this winter; £130 billion to cap energy prices for households and an estimated £40 billion to do the same for businesses.

The core problem is that without Russian gas there isn’t enough energy to go around Europe. It’s a problem that has been compounded by the fact that half of France’s nuclear reactors have been offline this summer and Norway, a major supplier of hydroelectric power, has had record low rainfall. With limited supply and high demand, people are bidding against one another for energy use. Prices will rise, and keep rising, until demand is reduced sufficiently to match supply. That’s if the market is allowed to function.

Part of the problem is that the Conservative party is just the Labour party on a five-year lag

Instead, Liz Truss is apparently planning to freeze household bills at or below £1,971, well below the actual market price of supply; the wholesale price alone for October-December is expected to be £2,491.

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