FORMER business secretary Lord Mandelson yesterday accused Ed Miliband of dragging the Labour party backwards with plans to freeze energy prices.
Mandelson, widely seen as the architect of new Labour, lashed out after Miliband told the Labour Party conference he would impose a 20-month suspension of household fuel bills if he wins the next election.
“As a result of the speech, I believe that perceptions of Labour policy are in danger of being taken backwards,” said Mandelson.
Defending the party intervention, Miliband said: “My job is to stand up for the public interest, not the interest of any one company or any six companies but the whole of the public.”
And yesterday he threatened the UK’s big six energy firms with a “stark choice” between either co-operating with his plan to freeze prices or being “part of the problem”.
But the six firms, which supply most of the UK’s gas and electricity, have hit back, insisting that profit margins in the industry remain relatively small and the plan could lead to blackouts.
In an open letter, the Labour leader threatened to end taxpayer guarantees to energy firms if they do not co-operate on his plans: “We can work together on the basis of this price freeze to make the market work in the future. Or you can reinforce in the public mind that you are part of the problem not the solution.”
Both the firms and analysts expressed disbelief at the plan, which were not discussed with energy firms prior to Tuesday’s announcement and could still be open to legal challenges.
“We are all concerned about rising prices and the impact on consumers, but we also have a very real responsibility that we find supplies to make sure the lights stay on,” said Roger Carr, boss of British Gas owner Centrica.
Neil Woodford, a fund manager at Invesco Perpetual which is Centrica’s biggest shareholder, yesterday branded Labour’s policy “economic vandalism” and said it “torpedoed any chance that any of that investment will happen between now and the next election”.
“It is insane, not least it is also fundamentally dishonest to suggest to the electorate that electricity and gas prices are where they are because of profiteering by the companies,” he told the Daily Telegraph.
Analysts at Citi hinted that the proposal could still face legal challenges, with Miliband’s plan, since it goes “against wider EU energy policy that is trying to remove government price interventions that have caused significant issues in Spain and France”.
Angela Knight of the Energy UK trade body said the plan posed a threat to jobs in the industry and was “posturing to no purpose”.
“Freezing the bill may be superficially attractive, but it will also freeze the money to build and renew power stations, freeze the jobs and livelihoods of the 600,000 plus people dependent on the energy industry and make the prospect of energy shortages a reality, pushing up the prices for everyone,” she said. The Policy Exchange think tank suggested consumers would benefit more if some green energy subsidies were abandoned.
Miliband said once the price freeze is over in January 2017 he would allow a new energy regulator to cut consumer prices if it believes firms are failing to pass on rate falls.