Shadow energy secretary: Reeves’ subsidies mean nothing without tax cuts
It is the cost of systems, not electricity, that is driving up businesses’ energy bills, and Reeves’ subsidies will do little to help, writes Claire Coutinho
Businesses big and small are being crushed by sky-high energy bills.
Of course it’s not just energy costs that businesses are struggling with. Every week seems to deal a new blow – higher taxes, more red tape, another cost imposed by a Cabinet where not a single person has ever run a business.
Rachel Reeves’ solution, announced on Wednesday, is another subsidy scheme to help some manufacturers with their energy costs. But dig into the detail and you will find that only 0.2 per cent of businesses will benefit. Pubs, restaurants, farmers, retailers and small manufacturers who are on their knees thanks to this government won’t get any help whatsoever.
The scheme also does not address the underlying problem: the cost of our electricity is too high. That’s why the Conservatives’ policy is simple. We need cheap power.
The Conservatives’ Cheap Power Plan would cut electricity bills by 20 per cent. Not just for 0.2 per cent of businesses, but for all businesses and households – and it wouldn’t cost the taxpayer a penny. How? By genuinely taking costs out of the system.
Britain’s taxes are making energy expensive
We have the highest industrial electricity bills in the developed world and 75 per cent of that bill is made up of non-commodity costs. That means the bulk of your bill is not the cost of generating electricity – it is system costs, policies and taxes that the government chooses to impose on top.
And those costs are going up. As energy bosses recently told Parliament, even if gas itself were free, bills would still rise by 2030 because these non-commodity costs are spiralling ever upwards. Major business groups like the British Retail Consortium and UKHospitality have said it is these costs that are causing businesses to feel the squeeze.
So what are these costs? A Carbon Tax which punishes us for using the gas power stations we need when the sun does not shine and the wind does not blow. Decades-old and eye-wateringly expensive renewable subsidies, network and grid balancing charges that are going through the roof thanks to Ed Miliband, and an ever-growing stack of redistribution schemes to compensate certain households and certain businesses for high energy prices.
If you run a struggling pub, shop or any other business that doesn’t qualify as a special case, you are being hit with a triple whammy: not just your own rising electricity costs, but also higher taxes and extra charges on your energy bill to subsidise the chosen few.
We need to make electricity cheap
This is a doom loop. Carrying on down this path will mean more businesses going under, which in turn means fewer people using electricity. But the fixed costs of the system will remain. So your bills will go up again as those fixed costs are spread over an ever-shrinking group of users. And on and on we go. Higher bills and fewer businesses means even higher bills and even fewer businesses.
This is not working for consumers, our economy or the environment. The single most important thing for decarbonisation is to make electricity cheap. Yet Ed Miliband’s chaotic rush to have the cleanest electricity in the world is pushing costs so high that it is deterring people from using that electricity.
High electricity prices are crushing industry, squandering our chance to lead on AI and penalising people who want to electrify. We need to break this cycle. If we want people to use electricity, then we need a relentless focus on making electricity cheap.
We cannot keep punishing British manufacturing with high energy costs and taxes in the name of climate change, only to drive them out of business and import the same goods that we used to make ourselves, but with much higher emissions.
The Cheap Power Plan would axe the Carbon Tax and remove non-commodity costs to cut electricity bills and make our businesses more competitive. And, crucially, it would not cost taxpayers or billpayers a penny.
Claire Coutinho MP is the shadow energy secretary