“Truss says that profit is not a dirty word, but we should be clear that the cost-of-living crisis is being principally driven by the profiteering of energy companies.”
By Beth Winter MP
On Thursday 8 September, Liz Truss used her first major policy announcement to address the broken energy market’s soar-away consumer bills driving the cost-of-living crisis.
Regrettably, it was immediately apparent that she has put defending the biggest private profit-driven corporations and wealthiest households at the top of her priority list.
She will support them at significant cost to those already struggling on low incomes, driving them further into poverty.
The problem is the profit motive driving the setting of people’s bills by the suppliers, and the energy firms’ refusals to shift from historic fossil fuels to investment in a renewable future.
Truss says that profit is not a dirty word, but we should be clear that the cost-of-living crisis is being principally driven by the profiteering of energy companies.
Bills which were subject to a cap of £1277 in October 2021, soared to £1971 in April and OFGEM said they would rise again to £3549 this October.
This rapid rise triggered the need for an urgent intervention by the Government. Despite denying she would offer further support during her leadership campaign, Truss soon confirmed she would follow Labour’s proposal to intervene in the market.
However, under her, the average energy bill will still go up to £2500 this October, for a period of two years.
She has claimed ‘this will save a typical household £1,000 a year’ compared to the OFGEM price cap announcement, but that fantasy saving will be cold comfort for those who are already struggling to pay bills.
The truth is that for most people, average bills will be £500 a year higher thanks to Liz Truss.
And yet again, as pointed out by Adam Corlett writing on the Energy Price Guarantee, it will be the richest fifth of households who will benefit most from Truss’ proposed price freeze gaining an average of around £1,300 this winter compared to £1,100 for the lowest-income fifth.
Many who rely on social security only received a 3.1% rise in April this year. And public sector workers are languishing on an average 2% rise in recent months, whilst the spending envelope to lift pay across public services this year is only 5%.
Whichever way you cut it, all those on social security or on public sector pay, are facing real terms income cuts thanks to inflation, whilst Truss allows their energy bills to climb higher.
Truss’ proposal, whilst allowing her to pretend there is a saving for household budgets, does so whilst propping up the profits of the privatised energy market.
Intervening to hold down energy bills comes with a cost. Resolution Foundation estimated, ‘support for households alone over the next six months would cost around £57 billion, rising to around £120 billion over the next two years’.
As Keir Starmer said in the Commons, ‘the real question the Government face; the political question—is who is going to pay.’
The Treasury estimates that energy producers could make £170 billion in unexpected windfall profits over the next two years. Labour has been clear that energy companies should pay the lions share, and that it wants to see ‘the windfall tax expanded now’.
Truss meanwhile has made clear her opposition to windfall taxes, telling the Commons, ‘a windfall tax … would undermine the national interest.’ The cost of Truss’ cap, will come from existing tax intake, rather than from the profits of greedy corporations.
Given the profitability in energy, Truss’ decision to hold down bills without levying a windfall tax amounts to a massive handout to the companies that have profited from the energy crisis leaving working class people to foot the bill.
Holding down bills is the right policy for now, if it is used to buy time to end the private profit model in energy, including ending the right to pay billions in dividends at taxpayers’ expense.
Some campaigners have set out how the energy company, Bulb, could be developed into a public provider.
In Wales, Welsh Government has pledged to establish a public supplier. Ynni Cymru is envisaged as a public energy company. Work is now urgently needed to flesh out how it can be developed, and progress be achieved on its establishment.
UK Labour needs to get behind these ideas and develop a UK-wide model along the lines of Welsh Government’s proposal.
Ultimately, we need to restore energy transmission and supply to the public sector, end the waste of rewarding rich shareholders, and start thinking about how public investment can incentivise the shift from historic fossil fuels to investment in renewables.