Labour attacks Coalition as UK's energy bills soar 21 per cent in three years

The charge of ever-rising prices for consumers will dog the Prime Minister in the run-up to the election

James Cusick
Tuesday 19 August 2014 13:55

Britain's household energy bills are rising faster than in most countries in the developed world, according to new research carried out by the House of Commons Library.

Based on figures from the Department of Energy and Climate Change, and using energy data from the EU and members states of the International Energy Agency based in Paris, UK consumers have faced three years of energy price rises experienced by only a handful of other countries.

Only Ireland, with an electricity price rise of 24.7 per cent, is above the UK's 23.5 per cent hike. With electricity prices actually falling in Norway and Hungary, down by 16.5 and 17.7 per cent respectively, only South Korea and Germany have had rises close to the UK figure.

Comparing rises in domestic gas prices between 2010 and 2013, the UK hike of 33.8 per cent is similarly among the highest recorded.

The new research examining the economic burden for UK consumers puts the Energy Department's reassurance last year that the UK's domestic electricity bill was "fairly average" compared with that of the rest of Europe in a new light.

Measured in prices per kilowatt hour, electricity costs less in the UK than in Denmark, Germany, Italy, Portugal, Belgium, the Netherlands, Slovakia and Austria. But the new research shows that, in the past four years, UK prices have risen more sharply.

Europe's cheapest electricity is estimated to be supplied by Greece, France, Poland, Hungary and Finland. The contrast with the United States and Japan's very low energy bills is still stark.

However, in a re-run of Ed Miliband's assault last year on energy prices – and his promise that a Labour government would freeze prices till 2017 – the shadow Energy Secretary, Caroline Flint, will this week revisit energy prices.

She will claim that household energy bills in the UK have risen four times as fast as wages since 2010. "These figures lay bare the full scale of the cost-of-living crisis and David Cameron's failure to tackle rip-off energy bills," she says.

In a speech in Reading, Ms Flint is expected to unveil further measures Labour believes is necessary to reform the UK energy market.

Focusing on the cost-of-living crisis that Labour believes will characterise the run-up to next year's general election campaign, she will say: "On David Cameron's watch, energy bills in Britain have risen faster than almost any other country in the world."

She is expected to repeat Mr Miliband's promise that a freeze on energy bills would save an average household £120 a year.

Labour's decision to revisit energy as a potential vote-winner before the autumn party conference season shows confidence that energy remains an issue for the Government.

Although Mr Miliband's price freeze was attacked by ministers as "Marxist" and "a political con" that threatened Britain's energy security, the announcement was widely received as a positive pledge to consumers that the Prime Minister would need to defuse ahead of the 2015 election campaign.

The Commons Library research will make uncomfortable reading for the Energy Secretary, Ed Davey, since an underlying message of the new data is that things could get worse.

It is estimated that the UK's household energy bills have risen by 21 per cent in real terms over the past three years – the equivalent of £221 a year. However, some suppliers have also introduced further price rises, which came into force in December 2013 and throughout this year, meaning the bad news in the library survey could get even worse.

The Competition and Markets Authority (CMA) is now investigating the UK energy market at the request of the market regulator, Ofgem.

Ofgem recently alleged that millions of UK households may be paying too much in domestic gas and electricity bills as competition across the sector was not strong enough.

While wholesale energy costs are likely to have contributed to around 60 per cent of the energy price rises, "green energy" measures may account for as much as 10 per cent of the rises seen in recent years.

Among the submissions to the CMA was that the regulation imposed after privatisation from 2008 had weakened competition, resulting in poorer deals for consumers.

The CMA recently said that it will test the idea that regulatory interventions have reduced the incentives for energy suppliers to compete. This investigation will still be going on when the election campaign and battle over energy are in full swing.

However, on Mr Miliband's side is the regulator's own evidence that profits for the Big Six energy suppliers rose from £233m in 2009 to £1.1bn in 2012.

Labour has promised that the big energy companies will be split up and governed by a new tougher regulator. The companies have countered that promise, saying this move would lead to power shortages, and jeopardise investment and jobs.

A DECC spokesperson said: “The Government is putting power into the hands of energy consumers. We’ve already reduced the cost of government policies on people’s bills by an average of £50 and we’re making it easier to shop around, switch and get the best deal.

“More than two million customers are saving up to £200 or more a year by switching to independent electricity suppliers since 2010 thanks to Government action to open the energy market.”

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