Westminster must take on energy giants to prevent fuel poverty

That even now, in 2011, families are forced to choose between whether to heat the home or eat a meal, is absurd and tragic in equal measure writes Olly Parker

Olly Parker is Events Director for the Fabian Society

That even now, in 2011, families are forced to choose between whether to heat the home or eat a meal, is absurd and tragic in equal measure.

New research released by The Institute for Fiscal Studies (pdf) shows how low-income households are forced to make that choice during periods of extremely cold weather.

On the day Scottish Power hiked gas prices by 19 per cent after its parent company, Iberdrola, announced a profit of £820 million in 2010, we need to re-open the debate about what the government should do to make sure that no one has to make that choice anymore, as well as suggest how the left can effectively campaign on the issue.

The last Labour government’s approach was benefit driven. For me the winter fuel allowance represents the good and bad in New Labour. It is a bold and truly popular doorstep policy that not even Osborne dares cut, but also a deeper symbol of how timid the last government became when it came to standing up against irresponsible capitalism by failing to create a real competitive market that would drive down the cost of gas and electricity.

We can’t simply continue to top up the benefits involved. Around £2 billion a year is given directly to households for the winter fuel payment, but as prices have risen by the amount the benefit gives out across the same period, the money is effectively further profit for energy companies.

A frequent excuse for price hikes is usually “uncertainty” in places like Libya (it used to be Iraq), but the link is almost an entirely spurious one. It is almost as ridiculous as saying that ‘there was no rain last week, so this week bread will be more expensive in Tesco’. Obviously there is some knock on effect, eventually, but there are hundreds of mitigating factors which take years to materialise, such as the long-term price contracts energy companies are locked into.

One solution, pushed in private by a growing number of business voices, is the need to truly split up the UK market by separating the different branches of extraction, transmission, distribution and retail. The lack of transparency around internal transfers and the ease with which large corporations can shift profits from one wing of the company to another is preventing the public from having the benefits of a truly competitive market.

Unlike mobile phones, where it’s perceived as relatively easy to move and companies put the effort into attracting and keeping customers, households rarely switch gas and electricity provider. The industry may call on people to “switch and save” but what’s the point when every UK provider put their prices up between 7 and 9 per cent last year within weeks of each other. You can expect the same to happen again with this announcement.

Last month, Will Hutton wrote very eloquently about the left making a case between good and bad capitalism. President Barack Obama is already doing the same in America. With Ed Miliband’s squeezed middle already feeling the pinch, this is one issue where we can use people’s real concerns about household bills to illustrate a wider point about Ed’s vision for the future of the Labour Party.

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