(and David Cameron)
I was astonished by Prime Minister David Cameron’s announcement that the government would legislate to require all energy utilities to offer their best tariff to all customers (although maybe not so astonished as the Ministers at DECC, or the Industry).
This is the problem of a work-experience Prime Minister, who has never held a proper job. Maggie famously observed “You can’t buck the markets”, but for Dave, we can say “You don’t understand the markets”.
Any scientist, or economist, or businessman knows very well that if you alter one factor in a complex, inter-linked system, you will create all sorts of unexpected and unpredictable consequences, many of which may be unhelpful
The classic example, of course, is the tax system. Ed Balls (and Nick Clegg) think that if you raise tax rates, revenues go up pro rata. But of course they don’t. Tax-payers review their arrangements, and find ways to mitigate the damage. In some cases higher tax rates can result in reduced revenues – as French President François Hollande is about to find out the hard way.
What will the utility companies do? They will raise their minimum tariff rates to ensure that they still make a decent return, even from the least economic customers. Indeed tariffs are volume-and-usage-dependent, so the “cheapest” tariff is not well-defined. The cheapest for one customer may not be the cheapest for another.
Several industry and consumer organisations have expressed fears that most people will in fact end up paying more.
I was, however, impressed by the way that East Midlands Tory MP John Hayes took the flak at PM questions, and I Tweeted: Respect to John Hayes MP. An excellent damage limitation job in the Commons after David Cameron’s egregious energy tariff gaffe.
I was amused to get a response from one Colin Gale, who describes himself as a Lib-Dem, and replied: @RogerHelmerMEP thats (sic) rich coming from someone who is no where near fuel poverty.
I replied again: @colingale Gee thanks Colin. So middle-class politicians can’t comment on energy pricing? Can healthy ones comment on the NHS?
And perhaps Health Minister Jeremy Hunt should not comment on the NHS either? Perhaps Iain Duncan Smith (who I assume is not on welfare) should keep quiet about welfare reform? Just for Colin’s benefit (if he gets to read this) I really do feel that as Energy Spokesman for the UK’s third political party, I really ought to be free to talk about energy.
But there’s a much more fundamental point. It’s clear that both the PM and Colin Gale imagine that Cameron’s rash policy would reduce prices for hard-pressed householders. We can forgive Mr. Gale – we expect no better from the Lib-Dems – but a “Conservative” Prime Minister proposing to legislate to set prices in the market? Has he taken leave of his senses? Many of us wonder if Cameron is really a Conservative – this suggests not.
Do we not recall the Soviet Union, where the main effect of State price controls was queues, and bread-lines, and grinding poverty, and a thriving black market, and shortages of just about everything? Have we forgotten those photographs of the GUM Department store, where two thirds of the shelves were empty, and the other third had nothing you’d want to buy?
That’s what you get with government price controls, and a Conservative Prime Minister should know that.
Which brings me to my picture. South Korea has a capitalist economy, and keeps the lights on. North Korea has state-controlled energy prices. Spot the difference.