Lib Dems: PM panicking over energy

Ed Miliband

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Ed Miliband and David Cameron clashed in the Commons over energy prices

The Liberal Democrats have accused David Cameron of making a “panicky U-turn” after he announced a review of green energy taxes.

The prime minister said household bills were at “unacceptable levels” and promised to “roll back” regulations introduced by Labour.

But a senior Lib Dem source said Mr Cameron had got “cold feet” on environmental policy promises.

Labour also criticised the PM, but he promised to help cut people’s bills.

Conservative MP Zac Goldsmith said Mr Cameron and Labour leader Ed Miliband were “Muppets” in their attitude to energy policy.

Three of the “big six” energy firms have announced price rises of between 8% and 10% in recent weeks and Mr Cameron has come under pressure to act, with Mr Miliband pledging to freeze tariffs if his party wins the next general election.

‘Better regulation’

On Tuesday, former Conservative Prime Minister Sir John Major called for a windfall tax on excess profits made by the largest suppliers.

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The context for the green charges that David Cameron wants to roll back is the Climate Change Act. It was voted through almost unanimously back in 2008 – only five MPs objected – and this set the framework for deep cuts in greenhouse gases over the next few decades.

With this, Britain became the first country to have legally binding targets and the goal is to reduce emissions by 80% compared to 1990 levels.

Achieving that will only be possible if the power sector makes a radical switch from fossil fuels – and that requires a massive investment with inevitable rises in bills. The precise amount is disputed.

The Climate Change Committee, set up to provide independent guidance, reckons that, of a typical rise of £520 between 2004-2012, £35 is due to low-carbon support with another £45 for energy efficiency. But those contributions are set to rise.

Unpicking this plan will not only strain the coalition but also raise questions about the viability of meeting the targets in the act that so many signed up to only five years ago.

During Prime Minister’s Questions on Wednesday, Mr Cameron said he agreed with his predecessor that charges were “completely unacceptable” and said the government was already intervening in the market to force firms to put customers on the lowest tariff.

But, rather than trying to dictate prices or influence the global cost of energy, he said the government’s focus was on dealing with the aspects of energy bills it could control. Green taxes, he said, accounted for £112 of the average annual dual fuel bill and should be reduced.

“We need to help people pay their bill and we need to help to get bills down,” he told MPs. “We need to roll back some of the green regulations and charges that are putting up bills.”

The review would be followed by a competition test for the energy market to establish how it was functioning.

Mr Cameron added: “I want more companies. I want better regulation. I want better deals for consumers. But yes, we also need to roll back the green charges that he [Mr Miliband] put in place as energy secretary [under Gordon Brown].”

And, speaking to the BBC, he said the coalition had “made huge steps forward in terms of environment policy”, but it was right to “look at rolling back the cost of some of these taxes, tariffs and charges”.

Downing Street said Lib Dem Energy Secretary Ed Davey would set out details of the competition review next week.

But the Lib Dems, governing in coalition with the Conservatives, are keen to keep green taxes, arguing that they are essential to creating a sustainable and environmentally friendly energy supply for the UK.

Graph comparing rise in energy bill and rise in wholesale energy price

A senior source told the BBC: “Everybody knows the Tories are getting cold feet on the environment. The Tories have put no properly worked-up policies in front of us.

“But we will not allow a panicky U-turn during PMQs to dictate government policy. The way to provide stable fuel bills now and in the future is not to make policy up on the hoof.”

‘Stress test’

The source added that Lib Dems in the coalition would not “allow the Tories to undermine our commitment to the environment, hurt the fuel poor, or destroy our renewable energy industry”.

“Nick Clegg has always said that we should stress-test every policy to make sure that there isn’t a penny more on bills than necessary,” they said. “Of course, we will look at the specific details of what the Tories propose. That is coalition government.”

In the Commons, Mr Miliband said 60% of green taxes had been introduced by the current government and reminded the prime minister of his stated ambition to lead the “greenest government” ever.

Graphic showing what your gas and electricity bills are paying for with the largest part being the wholesale purchase of energy, supply costs and profits. Green levy: 6% of a gas bill and 11% of an electricity bill currently go to government schemes aimed at saving energy, reducing emissions and tackling climate change

“He really is changing his policy every day of the week. His energy secretary says it is nothing to do with green taxes. And who is the man who said ‘Vote blue to go green’? It was him.”

However, energy regulator Ofgem rejected Labour’s claim that its retail market review had achieved nothing.

A spokesman said: “We are introducing the most radical set of reforms to the energy retail market since competition began.”

He added: “The standards are backed by our powers to levy fines if suppliers don’t meet these rules.”

According to government figures, environmental obligations account for 9% of the average £1,267 dual fuel bill, of which carbon taxes make up 2%. The cost of buying energy on wholesale markets makes up the largest proportion. at 47%.

Energy firms say profits account for about 5% of an average bill.

Asked whether the Lib Dems were signed up to a review, Conservative Party chairman Grant Shapps told the BBC that they were “pragmatic” and wanted to see bills coming down.

Friends of the Earth’s head of campaigns, Andrew Pendleton, said the best way to cut bills was “ending the nation’s dependency on costly fossil fuels”.

But John Allan, national chairman of the Federation of Small Businesses, said the prime minister’s review “could not only help households but also ease the pressure of high energy bills for millions of small businesses too”.

Speaker John Bercow

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The Speaker says David Cameron’s use of the “con man” jibe in PMQs is a “bit below the level”

During a boisterous Prime Minister’s Questions session, Mr Cameron was ticked off by Commons Speaker John Bercow for twice describing Mr Miliband as a “con man” in reference to his pledge to freeze bills for 20 months if Labour was elected.

Firstly, he contrasted the Labour leader with the former Conservative prime minister, claiming: “Sir John Major is a good man. You are acting like a con man.”

And in response to a question from Conservative MP Brian Binley, he said: “It simply is the politics of the con man to pretend that you can freeze prices when you’re not in control of global energy prices, but the proper approach is to look at what’s driving up bills and deal with it.”

The Speaker said this was “unparliamentary” language and “a bit below the level” expected of a prime minister.

Conservative MP and environmentalist Zac Goldsmith criticised both Mr Cameron and Mr Miliband, writing on Twitter: “In 2010, leaders fought to prove they were the greenest. Three years on, they’re desperately blaming their own policies on the other. Muppets.”

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