- Miliband hits energy firms with plot for £4.5bn price freeze
- British Gas owner Centrica threatens to quit UK over plan
- Policies on tax, energy and construction slammed
ED MILIBAND yesterday launched an extraordinary attack on swathes of British business as he returned his party to its left-wing roots by unveiling a range of punitive policies that drew anger from industry groups.
The Labour leader told his annual conference in Brighton he would outlaw energy price rises for 20 months if he wins the 2015 election, while forcing energy companies to split production and sales arms.
But the move was condemned for risking “economic ruin”, jeopardising major investment plans and for misunderstanding the real reasons for price hikes, including green rules.
He also pledged to increase tax on larger companies and to confiscate land that is not used for house- building, while confirming plans to push up the minimum wage, to force firms to take on EU apprentices if they recruit non-EU workers and to hit banks with another levy.
Shadow chancellor Ed Balls also confirmed that he would drastically reduce tax relief on pension contributions for high earners, a move that would hit many City workers.
Miliband said a future Labour government would require an immediate freeze on all gas and electricity costs for UK homes and businesses from May 2015 to January 2017. A new energy regulator would then be tasked with forcing suppliers to cut their rates if profit margins were judged to be excessive.
Party sources said the plot would cost energy groups £4.5bn, based on current price projections.
British Gas owner Centrica responded by threatening to leave the UK marketplace: “If prices were to be controlled against a background of rising costs it would simply not be economically viable for Centrica, or indeed any other energy supplier, to continue to operate.”
But Miliband’s aides said firms would simply have to accept reduced profits if wholesale energy prices rise while Labour’s price cap is in place: “Given they’ve been making £4bn a year profit in overcharging, we believe they’ll have to absorb the costs.” They insisted that its plan would be legal under EU law. But the party has yet to release the guidance it says it commissioned from a QC.
All three major business groups criticised Miliband’s speech, amid warnings that cutting energy profits would damage investment in new power stations and green energy.
“Businesses will view the proposals on tax and energy as a setback for Labour’s pro-enterprise credentials,” warned John Cridland of the CBI. “Rising energy bills are tough on families and businesses, but the proposed energy price freeze will deter much-needed investment.”
The Institute of Directors said the price cap plan risked “piling more distortion on an already grossly distorted energy market”, while the British Chambers of Commerce criticised Miliband for failing to focus on the “wealth creation and economic growth” that would ultimately increase living standards.
Sources close to George Osborne told City A.M. Miliband’s plan would hinder the recovery: “He had nothing to say about cutting the deficit but did hit businesses with a damaging tax rise. He seems not to realise this will cost jobs and impact on hard-working people.”
The Labour leader also vowed a 2020 construction target of 200,000 new homes a year, and a raft of state-led development corporations to build new towns. But builders reacted angrily to his plan for a “use it or lose it” law designed to force them to construct new homes. Local councils would be able to issue escalating fines and even compulsory purchase of plots.
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- Centrica labels Labour plan as a recipe for ruin
- Developers deny landbanking as Miliband vows to fine building firms sitting on valuable plots
- Balls to restrict pension tax relief for wealthy
- Business groups tear into Labour plan to scrap corporation tax cut
- Latest polls put Labour eight points ahead
- Miliband’s lurch to left is a recipe for disaster