General Election 2017: Prime Minister Theresa May's energy price cap is little more than a political ploy

 
Julian Harris
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Theresa May Campaigns In Yorkshire
Theresa May is on track for a thumping election victory, according to polls (Source: Getty)

Theresa May likes to model herself as a common sense Conservative, a moderate pragmatist simply looking out for the interests of the average Brit.

After moving into Downing Street last year she pledged to "reject the ideological templates provided by the socialist left and the libertarian right and to embrace a new centre ground in which government steps up – and not back – to act on behalf of the people."

It was in this vein that she and business secretary Greg Clark yesterday confirmed their plan for an energy price cap, "to protect ordinary working families". The policy will be pursued once the Tories have completed their inevitable victory in next month's General Election.

Clark appeared to be adopting an everyman persona himself when admitting on TV that he has not tried switching energy supplier. "It is quite a hassle to do so," Clark told the BBC, adding that customers should not have to "go through the fuss" of finding a better deal for themselves.

"We are prepared to intervene when markets are not working for ordinary working families," the Conservatives added.

Clark's reluctance to switch energy supplier does give him something in common with the millions of Brits who still fail to move away from uncompetitive tariffs. But equally, it is rather galling to hear a minister blame heavy-handed price caps on supposed market failure, when he cannot even be bothered to exercise his right to benefit from the competition this market has provided.

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Despite constant government tinkering, the UK has developed a respectably competitive energy market since opening it up in the 1990s. Price hikes experienced in the last 10-15 years are due to a range of factors such as the move towards cleaner energy and the costs of securing Britain's energy security in the coming decades. It may be tempting to blame everything on big profiteering energy companies, but an in-depth Competition and Markets Authority (CMA) report into the sector found this was simply not the case.

The question ministers should be addressing is this: what factors are holding back the market from being even more competitive, and delivering greater choice for customers? For example, former energy regulator and university professor Stephen Littlechild believes a series of regulatory interventions, designed to simplify the market, have eroded competition and prevented more people from switching.

But rather than pursue a constructive approach to improving the market, May and Clark have opted for a blunt instrument that will erode competition, deter investment, and put off potential new entrants – all consequences that, over time, put upward pressure on prices. The CMA itself said the policy "runs excessive risks of undermining the competitive process, likely resulting in worse outcomes for customers in the long run".

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This is not an evidence-based, level-headed policy, as the Prime Minister wants us to believe. It is little more than a vote-winning ploy. It is part of her bid to dominate an electoral centre-ground abandoned by Labour's hard-left leadership.

May is a canny politician, but she is also a meddler with an unrealistic faith in the ability of politicians to pull levers and change markets. The fact that she does this while still being seen by many as a down-to-earth pragmatist is testament to her political skill – but too often her approach manifests itself in misguided and harmful policies.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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