Tony Blair was accused yesterday of being "in denial" over the threat to gas supplies this winter as the UK's looming energy crisis sparked angry exchanges in the Commons.
Amid fears an Arctic freeze could add £600m to domestic fuel bills, the Prime Minister admitted "there will be difficulties with prices" this winter, especially for big industrial users of energy. His admission came as the Conservatives accused the Government of "losing its grip" over gas supplies and one of the country's biggest manufacturing organisations ridiculed Mr Blair's claims that UK energy prices were still the cheapest in Europe.
Responding to the Prime Minister's assertion that "industry prices here, on the whole, for domestic users are way below the EU average", Martin Temple, the director-general of the Engineering Employers Federation, said: "UK companies are facing the highest gas prices. These remarks smack of complacency and we are at the stage where we can only conclude that the Government is in denial over this issue and it is industry that is now paying the price."
Mr Temple added that remarks by ministers "imply to companies the Government does not understand the situation".
Business groups have warned that in the event of a severe winter, large swathes of manufacturing could be forced to shut, evoking memories of the three-day week in the early 1970s, to conserve gas supplies for the domestic market. A number of big energy users have already begun to cut consumption. Industry representatives also held secret crisis talks with ministers at Downing Street two weeks ago.
In an effort to quell the growing political storm over gas shortages and soaring fuel bills, the Energy minister Malcolm Wicks told the Commons in an emergency statement that according to National Grid the UK was "awash" with gas. He said the network had advised him the situation with regard to spot gas prices was "totally irrational". "The facts are that so far this winter there have been no gas shortages and supply and demand have remained in balance."
Earlier Alan Johnson, the Secretary of State for Trade and Industry, told a parliamentary committee Britain would experience real problems only if there was a "one-in-50" winter and even then domestic consumers would not be affected.
But with the first snow of winter expected within the next 48 hours, there was no respite for Mr Blair, who was forced on to the defensive at Prime Minister's Questions by the Conservative leader Michael Howard. Mr Blair was accused of incompetence over gas prices which could lead to a doubling of domestic fuel bills for the winter. Mr Howard said the failure to guarantee supplies showed the Government was "on its skids".
Mr Blair replied: "Of course there are going to be difficulties with gas prices because of the cold winter we are likely to have. But, as the energy [suppliers] have made it clear, they are doing their best to make sure that demand is properly met."
The utility billing specialists uSwitch.com warned that the freezing temperatures were likely to drive up the average domestic energy bill this year by more than £100 to £821. Assuming that consumption rose by 5 per cent, this would add £600m to bills. USwitch also warned of a further 15 per cent price rise in the new year, after the 471 per cent rise in wholesale gas prices since the start of this year.
USwitch also contradicted Mr Blair's assertion that "UK prices are the cheapest in the EU". It said figures compiled by Eurostat, the European Commission's statistical arm, showed prices were lower in seven of the new accession states, with charges in Latvia 44 per cent below those of the UK.