UK Government Has No Intention Of Stopping Energy Bill Rises
New research suggests the vast majority of Brits are concerned about energy bills and nearly half think government is intent on making things worse
Latest data from the research group More in Common shows that the cost of living is the top concern of British families and high energy bills are the dominant driver of this concern.
High energy bills are having a profound impact, seriously harming mental health and quality of life.
Nearly half of people believe the government has no plan, or a plan that is actively making things worse.
Let’s dig into the detail of the findings and consider what immediate actions government could take to alleviate the pain.
The report finds that three years of high energy bills have scarred the national mood, making nearly all income groups feel stressed and anxious. High energy bills mean many people feel that no matter how hard they work, they will never be able to get ahead and enjoy a comfortable life.
In a stunning indictment of Ed Miliband’s ‘net zero’ policies and his Clean Power 2030 plan, 60 percent of people do not believe that energy bills will ever be affordable again.
More in Common say that the sense that Government is standing idly by as people are exploited is feeding anti-system attitudes that are driving voters away from the established parties.
The level of concern is high among people earning just enough to be ineligible for government support. These people will react negatively to policy approaches that focus the burden of high energy bills away from the most vulnerable on to the “just about managing.”
Widespread Concern and Stress
As shown in Figure 1, 73 percent of households are somewhat or very concerned about energy bills this winter.
The level of concern is most acute in low-income groups, but 57 percent of households with over income over £100,000 are also concerned about high energy bills. This is leading to increased stress and anxiety with many having trouble sleeping and putting up with living in a home that is uncomfortably cold.
Many people are also making the connection between high energy bills and the broader economic malaise. High energy bills impact businesses directly, forcing them to push up prices.
They also reduce consumer demand because customers have less disposable income to spend.
As shown in Figure 2, concern about energy bills also cuts across party lines.
Reform voters are most worried about energy bills, with 80 percent somewhat or very concerned. In a superbly ironic twist, nearly three quarters of Labour and Green voters are concerned about high energy bills this winter.
The voters for the parties that have been pushing the “cheap renewables” line most actively are concerned about the impact of their policies.
As shown in Figure 3, except for Labour voters, people are not sure energy bills will ever become affordable.
Around two thirds of Conservative, Liberal Democrat and Reform voters are not sure energy bills will ever become more affordable. Emphasising the earlier point, 62 percent of ‘green’ voters also appear to have lost faith in the “cheap renewables” mantra.
Who is to Blame for High Energy Prices
In a worrying sign for Labour, 75 percent of people believe the actions of the UK Government are somewhat or entirely to blame for high energy bills as shown in Figure 4.
Energy suppliers and generators also come in for their share of the blame. Many people no longer believe that high energy bills can continue to be blamed on the war in Ukraine.
Many people believe that government could take action to reduce energy bills but is actively choosing to not do so.
Some Brits were also concerned that government is actively making things worse by prioritising the need to ‘decarbonise’ our energy system, as shown by Figure 5.
The level of concern about energy bills, coupled with the perceived lack of action is leading to a collapse in confidence in political institutions.
Focus on Cost Reduction
In focus groups run by More in Common, a clear consensus emerged that the Government should focus on bringing down costs for all rather than just subsidising the fuel bills of the vulnerable.
This is interesting, because most of the evidence given to the recent Parliamentary inquiry into the cost of energy was displacement activity focused on peripheral issues and on the kind of pocket-shifting solutions rejected by the participants in this research.
The research did not cover specific policies that people would favour to bring down costs. However, the Government needs to take drastic action if it is to head off the growing revolutionary mood.
We have long covered ideas to cut energy bills and reiterate them here:
If the Government wants to follow the clear wish of the people consulted in the More in Common research, it really needs to tackle the root causes of high energy bills by implementing the following measures.
Remove ‘Carbon’ Costs
As shown in Figure 7, Ember has produced an interesting chart breaking down the fuel costs and ‘carbon’ costs of gas-fired electricity.
In August, fuel costs were £54.67/MWh and ‘carbon’ taxes were £25.77/MWh, or 32 percent of the total wholesale cost.
Eliminating ‘carbon’ costs from the Emissions Trading Scheme (ETS) and the Carbon Price Support mechanism would immediately reduce energy bills for both consumers and businesses.
It would also have the welcome knock-on effect of reducing the total revenue received by generators funded by Renewables Obligation Certificates (ROCs) and might also reduce grid balancing costs.
Cut VAT and ‘renewable’ subsidies
VAT of five percent is currently added to energy bills. Cutting VAT to zero would immediately reduce energy bills for everyone.
There should be no new subsidies for ‘renewables’. This will render most of them uneconomic, and mean we no longer need to fund the planned expansion of the grid.
We should also consider cutting existing subsidies by setting the Renewables Obligation to zero, immediately removing ~£7.5bn of costs from energy bills.
It is probably also time to consider reducing the £2bn cost of Feed-in-Tariffs by stopping the annual indexation in line with inflation. FiT payments could be stopped for those who have already received payments in excess of the initial capital cost.
Knock on Effects
The reductions in energy bills from the measures outlined above will have important knock-on effects. The Warm Home Discount can be reduced or eliminated for all but the most vulnerable because there will be less need for it.
Moreover, the Energy Company Obligation that forces companies to install insulation measures could also be cut because it is of dubious value and there will be less need if energy is cheaper.
These measures will cut energy bills for everyone.
Moreover, fewer renewables on the grid means we will not need as much backup from the capacity market and grid balancing costs will stop rising and may even fall.
Fix Energy Supply
The Government must also look forward and fix energy supply.
They should lift the ban on North Sea drilling and end the moratorium on fracking so that we can develop more of our own gas resources.
Simple supply and demand economics will ensure that increased gas supply will reduce prices.
This will improve our balance of payments, create good, unsubsidised jobs, improve energy security and have a smaller impact on the environment than importing LNG from the US or Qatar.
Conclusions
High energy prices are having a pernicious effect on people, businesses and the wider economy. Voters do not believe the government has a plan to bring down prices and many believe that plans are actively making things worse.
The Tony Blair Institute now seems aware of the problem and is recommending cutting ‘carbon’ taxes and slowing down the Clean Power 2030 plan. Even Keir Starmer is rumoured to be considering ditching Miliband’s plans.
The Government should eliminate ‘carbon’ taxes, cut VAT and slash ‘renewables’ subsidies to bring down energy bills, calm the electorate and set us back on the path to growth and prosperity.
They should be implementing the easy measures that would cut energy bills overnight.
But we all know Labour won’t do any of this.
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