October 16, 2013 10.19 am This story is over 97 months old

Why the energy market needs a reset

Market reboot: As bills continue to rise, the energy market will continue to operate ineffectively if not put in the right direction, writes Lucy Rigby.

Last week, just as the colder Autumn weather seemed to arrive, we saw a staggering 8% energy price rise for consumers and businesses. As usually happens, the media reported the rise, people reacted with anger and frustration, and key government ministers wrung their hands. The upshot: nothing. No change at all.

Bills will continue to rise exponentially, no matter how unfair we know this is, the energy market will continue to operate ineffectively and other energy companies will detail their price hikes in the coming weeks.

Ed Miliband announced 3 weeks ago that, if elected in 2015, Labour would reset the energy market. Polling of public opinion shows huge and overwhelming approval for this policy – people recognise the energy market requires dealing with and that something ought to be done.

This isn’t resetting a utility market for the sake of it, it’s absolutely central to dealing with the cost of living crisis that many people and many businesses are currently experiencing. Just today, a report by the foodbank charity The Trussell Trust reveals not only has the number of families requiring food parcels three times as high this year as last, some families are so fuel poor they can’t afford to heat the food in their parcel.

So what was the government’s reaction to the price freeze proposal? Well at first it was “catastrophic” and going to bring down the energy markets, then it was not much at all really — to be “taken with a pinch of salt”, then Cameron himself said it “struck a chord” before contradicting himself entirely at Prime Minister’s Questions last week in branding the policy “Marxist”.

In truth, Cameron and Osborne have been flailing around because they don’t know what the answer should be. They are men whose political reference point is the 1980s, when Thatcher reigned supreme, privatisation, deregulation and trickle-down economics were the order of the day and the government, as a matter of principle, stood back and let markets rip.

Whilst most have recognised following the global financial crash caused by that very deregulation that governments have to act when markets fail, Cameron and Osborne have been slow to catch up because this concept contradicts their ideological bedrock.

The result of this confusion however, is not just a deep incoherence in government policy (and the corresponding rather painful-to-watch flapping) but also that the cost of living crisis for families and businesses worsens by the day.

Energy bills have risen by an average of £300 since David Cameron became Prime Minister, while energy companies’ profits have shot up. Businesses say that energy bills are the second biggest cost they face. When wholesale prices rise, the energy companies pass the costs on to consumers — but when they fall, bills stay high.

Ed Miliband’s energy plan will see gas and electricity bills frozen from the General Election to 2017 – enough time to reset the energy market – making sure it works for ordinary families and businesses instead of ripping them off.

The plans will save a typical household £120 and the average business £1,800. You can see how much you could save by visiting FreezeThatBill.com. This is one of a set of policies from Labour to tackle the cost of living crisis head on.

I’m right behind Ed, because I know people and businesses in Lincoln deserve better. They need a modern, practical, sensible government that sees today’s issues and potential solutions as they are, on their facts, rather than through the ideological prism of a different era.

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Lucy Rigby is Lincoln Labour's candidate to be the city's next MP. She is a solicitor and lives in central Lincoln.