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.

21 Responses to “Westminster must take on energy giants to prevent fuel poverty”

  1. SERA

    RT @leftfootfwd: Westminster must take on energy giants to prevent fuel poverty: //bit.ly/iusgQi writes @OllyParkers

  2. Daniel Elton

    @dlknowles @TimMontgomerie @alexmassie -calling all sincere freemarketeers the need to break up the energy cartel: //bit.ly/iusgQi #LFF

  3. The Cat

    Westminster must take on energy giants to prevent fuel poverty: //bit.ly/iusgQi writes @OllyParkers

  4. Natan Doron

    Brilliant analysis by @OllyParkers RT @leftfootfwd: Westminster must take on energy giants to prevent fuel poverty //bit.ly/kx8iLk

  5. Christian J Smith

    Brilliant analysis by @OllyParkers RT @leftfootfwd: Westminster must take on energy giants to prevent fuel poverty //bit.ly/kx8iLk

  6. Olly Parker

    Westminster must take on energy giants to prevent fuel poverty: //bit.ly/iusgQi writes @OllyParkers

  7. Captain Disco

    Brilliant analysis by @OllyParkers RT @leftfootfwd: Westminster must take on energy giants to prevent fuel poverty //bit.ly/kx8iLk

  8. Hitchin England

    RT @leftfootfwd: Westminster must take on energy giants to prevent fuel poverty: //bit.ly/iusgQi writes @OllyParkers #NewsClub

  9. Daniel Knowles

    @dlknowles @TimMontgomerie @alexmassie -calling all sincere freemarketeers the need to break up the energy cartel: //bit.ly/iusgQi #LFF

  10. Cian O'Donovan

    Good article on fuel poverty by @OllyParkers. Going beyond energy and into the nature of "good" capitalism is a must //bit.ly/kwDbRL

  11. Aaaaargh!

    Seems to me there is a much wider issue – the prices of our food and energy are decided on the world exchanges, our energy companies just take advantage of that.

    The very people/organisations who have brought the world economy to it’s knees are the ones who buy and sell our food and energy and you won’t see them going hungry.

  12. Optimismsaturation

    This call to pass the buck for energy policy on to market forces just sounds like shirking responsibility for the big decisions we’ve got to make about our society and its future.

    Almost literally everyone’s attacking this shadowy ‘big business’ and ‘corporate power’ nowadays. When corporations are in fact now keen on handing away as much responsibility as possible by contracting out and calling in management consultants to tell them how to run their own business. The ‘evil corporate power’ stuff is more often than not a silly semi-conspiracy theory to cover up the inadequacy of both leftist and free-market ideology nowadays.

    Really we should be challenging the trendy environmentalist luddites who attack economic development and power-generating technologies like nuclear and hydroelectric dams. They are the ones arguing for more expensive energy – effectively for giving less power to the poor and the vulnerable.

    What we need is not yet another appeal to market forces, but to sort out a proper vision of a dynamic, developing, growing world with plenty of energy and goods for all.

  13. Ed's Talking Balls

    I agree, these businesses shouldn’t be allowed to profiteer this way. Putting fuel prices up well beyond inflation when people’s wealth is being eroded day by day is disgraceful and government should be doing something about it.

    A non-means tested winter fuel allowance is completely the wrong way to address this issue; government must strike at the heart of these shameless, incessant price hikes. Failure to sort this is messing with people’s lives.

  14. bill pearson

    we must act to get a us out of fuel poverty write to your MP

  15. reded

    What about the millions of pounds being diverted into the pockets of wealthy landowners like Cameron’s Father in Law for the privilege of allowing us to put wind turbines on “their” land. Time to compulsorily purchase the land for a fraction of the market value in the national interest.

  16. mr. Sensible

    There are things households can do, like insulation and using alternative sources of energy, but we do need to get a grip on energy companies profiteering in this way.

  17. Leon Wolfson

    Mr. Sensible – Only if they own the home, typically. Improvements need a landlord’s permission, usually, and they rarely give it. Ours has refused to allow us to solve a draft problem where I live, for example.

    Energy policy should focus on affordability as a major criteria, which it simply isn’t currently. We may need to shut off the electricity here over the next winter if prices rise any higher, because again the landlord insists we have to use an meter – pushing prices even higher.

    That’s going to halt the work I do from home, and limit my work for Universities.

    Nuclear Power is low-carbon AND affordable, compared to wind farms which can even TAKE energy to run at cold peak times!

  18. jkolmmurray

    Prices are going up because the cost of producing energy is going up and developing economies are using a lot more of it to make stuff, largely for people in the west. No amount of jiggery-pokery in the market takes away from those facts. The uninformed should stop obsessing over supply and concentrate on reducing demand. A meaningful and effective domestic energy efficiency programme (not the Green Deal) would go a long way to reducing fuel poverty than changing the way we generate electricity, particularly since most energy use in the home is for heating, largely using gas. Using electricity as a heating fuel is foolish given generation, transmission and distribution losses.

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