Business groups have slammed Theresa May’s pledge to cap energy prices, claiming her free speech “rhetoric” was not being backed up by action.
In a speech that was disrupted by prankster Simon Bodkin (aka Lee Nelson) handing the Prime Minister a P45, and overshadowed by May’s efforts not to lose her voice, the Prime Minister promised “an end to rip off energy prices once and for all”.
“While we favour free markets, we will take action to fix them,” May said.
She will publish a draft bill next week, giving regulator Ofgem powers to impose a cap on standard variable tariffs (SVTs) over the whole market. Ofgem is expected to put forward plans for safeguarding customers on the poorest value tariffs, but this power will enable the body to go further than it currently can.
In a follow up briefing sent out after May’s speech, the Conservatives said the plan “still preserves the workings of the competitive market and the principle of arms-length regulation”.
“It will be up to Ofgem to set the level of the cap. There should be savings for customers on bad deals, but enough headroom for there still to be a reason for people to shop around. And this measure is intended to be temporary, while innovations such as smart meters arrive and enable the market to work properly for everyone,” the briefing explained.
But the news was not taken well by the market. Shares in the British Gas parent company fell as much as 6.5 per cent as she spoke, while SSE’s share price also dropped 3.4 per cent.
Centrica’s share price is now lower than it has been for five years.
May had been under political pressure to act on energy prices, with a number of her MPs calling for action ahead of the winter. She had pledged a price cap on energy bills for 17m families during the general election campaign, but dropped it from the Queen’s speech subsequently.
But concerns have been raised that a cap may actually make consumers pay more in the longer term.
Adam Marshall, director general of the British Chambers of Commerce (BCC), said: “Businesses will be confused by the Prime Minister’s commitment to free markets, on the one hand, and her stated intention to intervene in the energy market, on the other. Attention must be paid to avoid unintended consequences that drive up costs to consumers or businesses.”
CBI boss Carolyn Fairbairn agreed. “Affordable energy matters for everyone and particularly for the most vulnerable. However, today’s announcement is an example of state intervention that misses the mark,” she said.
“Market-wide price caps are not the best answer. Suppliers are already acting, providing support to those on pre-payment meters, and continued action to phase out standard variable tariffs would benefit a wide range of consumers, including those on the lowest incomes.”
A spokesperson for SSE said the firm would “look carefully at what is proposed by government and detailed consultation is required to help avoid any unintended consequences. SSE believes in competition not caps, so if there is to be any intervention it should be simple to administer, time-limited, and maintain the principles of a competitive energy market to best serve customers’ interests.”
Ofgem said: “Our number one priority is to protect consumers. We share the government’s concern that the market is not working for all consumers, especially the vulnerable, and will work with the government on their plans announced today to better protect consumers on poor value deals.”
Almost everything that could go wrong during May’s make-or-break speech did.
It wasn’t just the comedian with the P45 who disrupted proceedings – although this was a massive security breach, May remained calm throughout and managed to get back on track fairly soon after he had been ejected.
But she struggled with a cough for much of the speech, at times barely able to speak at all.
At one point she was handed a cough sweet by chancellor Philip Hammond, and given a standing ovation to allow time to collect herself.
Foreign secretary Boris Johnson, under fire this morning after his “dead bodies” comment last night, was seen being chided by home secretary Amber Rudd to join the ovation.
But before long, May was coughing again, and quipped “shows how good the chancellor’s cough sweet is”.
Then towards the end of the Prime Minister’s speech, one of the letters on the board behind her fell off, so it read: “Building a country that works or everyone”.
And it didn’t end there. Before long the sign read “bui ding a cou try tha orks or ryon”. Despite the ovation, it felt as though this was a metaphor for the speech and perhaps May’s leadership as a whole.