Monday 12 September 2022

Fluffing the Energy Price Freeze

It was supposed to be the biggest event of last week. Until, in the words of BBC news reader Clive Myrie, Liz Truss's energy price plan was "insignificant now" as the news started filtering out about the Queen. If only that was the case, and her royal demise meant plummeting fuel bills and was no longer an issue. Unfortunately, they have not gone away and despite assurances Truss gave in the Commons, millions of people still fear what Winter may bring.

Recalling the time before politics got wiped out by official mourning, Truss announced a price freeze capped at a household average of £2,500/year for the next two years. The Tories are continuing with Rish! Sunak's energy bill relief. That amounts to a £400 discount on energy bills for every household, and additional support for pensioners, the disabled, and people receiving some social security payments.

On the question of paying for it, Truss skimped on the necessary detail, which has since been ably dissected, but she avoided the most obvious political pain: the suggestion users would cover corporate profits with a levy spread out over ten or twenty years on energy bills. Not even Truss is that daft, it appears. Instead, the mooted £150bn cost is going to get paid out of government borrowing. A move guaranteed to get sections of the parliamentary party a touch sweaty. But it does come with a possible flip side for the fiscally conservative.

Those who were taken with Jacob Rees-Mogg's plans to butcher the civil service now have the perfect excuse to swing the axe. Truss said little to nothing about another round of cuts during the leadership campaign, but the stacking up of even more borrowing on top of the Covid debt is just the pretext more austerity needs if Truss finds certain quarters of the public sector bothersome. 2022-24, however, is not 2008-10 and it's difficult to see that this would appeal outside the pensionable and propertied core Tory support.

Truss has avoided the most obvious bear trap, but there are two difficulties to bear in mind. Keir Starmer's reply to Truss's statement last Thursday saw his best Commons performance since becoming Labour leader. His critique, that Truss's outright refusal to tax the energy companies' surplus profits, was more about protecting payouts to shareholders than ensuring people could heat their homes was spot on. Also, credit where it's due, he understands that people are angry with gas and electricity firms for ripping them off and would like to see them punished for it. There are significant problems with Labour's price freeze policy, but it does offer a way of kicking the energy fat cats by making them cough up. Truss's preference for sticking the price freeze on the never never ham-fistedly aligns her government with deeply unpopular outfits, something she didn't have to do. If Labour has any sense, it should spend the next two years hammering away on this.

The second is how Truss presented her plan. The £2,500 price cap figure Truss announced is all millions of people are going to have seen. This compares unfavourably to Labour's £1,971. It doesn't matter that, in practice, the cap works out as £2,100 for everyone and will actually be less than that given energy prices rises aren't going to be as eye-watering as forecast come October. Truss nevertheless gave that impression, millions will still be worrying about costs, and this only increases their antipathy toward her. Something the lengthy break from politics is likely to exacerbate as Truss trails the new King around the country on his investiture tour and says nothing.

On Monday the first proper poll of Truss's reign was published, and while her coronation has produced a bounce the Tories trail Labour by seven points. She needed to knock it out the park with this one, and while not the disaster some on the government benches feared, her framing of the freeze and decision to shield profits means she starts her premiership on the back foot. Not the most auspicious of beginnings, and not one likely to get much better.

Image Credit


Anonymous said...

"and while it is not the disaster some on the government benches feared" - I thought they (and everyone else) was expecting double digit leads in the polls by now?!

Old Trot said...

The dilatory way Truss and her Ayn Randist buddies are handling (ie, not handling) the looming mega gas and electricity price hike (as merely a part of the wider inflation crisis) is quite extraordinary. The supposed 'maximum AVERAGE price cap' figure will turn out to be pretty misleading - when huge price increases for most people and businesses per kilowatt hour are already in play and not going to go down. My own kilowatt charge per hour for gas, having just ended a fixed price deal, is ALREADY 40% higher than it was ! It is amazing that a supposed 'pro business' Tory government STILL hasn't told small and medium sized businesses what it intends to do to protect them from imminent humungous, ruinous, price increases. Tens of thousands of small businesses , with many hundreds of thousands of attached jobs, could be facing imminent closure as we stand today. Meanwhile Truss is intent only on touring the UK with our new, dimwitted, monarch ! The UK is now apparently ungoverned and also without an effective political or trades union opposition of any sort - at least until the ludicrous '10 days of national mourning' is completed .

Blissex said...

«it's difficult to see that this would appeal outside the pensionable and propertied core Tory support»

Sometimes I wonder why some people seem to assume that the goal of the Conservatives is to appeal to 90% of voters, when instead their real goal must be to lose as few of their 75+ seat majority as possible by keeping enough of their current 43% of voters (mostly “pensionable and propertied core Tory support”). The rest quite simply don't matter. Electoral politics is not that complicated...

Stephen Bush "NEW STATESMAN" 2018-03-16: «One Tory minister in a safe seat told me that when she used to ask Osborne for something, he would first ask her how big her majority was — and then reply, with a smile, that it was too large for her enquiry to be worth considering»
«He said he resigned because he lost the ability to influence where the cuts will fall, adding: “The truth is yes, we need to get the deficit down, but we need to make sure we widen the scope of where we look to get that deficit down and not just narrow it down on working age benefits [...] otherwise it just looks like we see this as a pot of money that it doesn’t matter because they don’t vote for us, and that’s my concern. [...] This is not the way to do government.”»