Adam Smith Inst - Theresa May's energy price cap will backfire
ASI Head of Projects Sam Dumitriu, commented in response to Theresa May's call for an energy price cap
"When Ed Miliband called for 70s style price controls on energy prices in 2013 the Tories were right to oppose it. The facts haven’t changed since then, only the politics. We said back then that proposing a cap would force energy companies to keep prices high even as wholesale prices fell as a precaution – and, with the price cap on the table since then, that’s exactly what’s happened. Since Theresa May floated resurrecting Red Ed's price cap, energy companies have hiked prices by as much as 40% in anticipation of a cap.
"The real solution to high energy prices is more competition – something that the Competition and Markets Authority and five previous Ofgem regulations have said is the real problem with the British energy market. Britain used to have an incredibly competitive energy market with the highest rates of active customer switching in Europe, but since 2009 over-regulation has lead to a nearly 50% fall in switching rates. Theresa May’s proposed cap on Standard Variable Tariffs would destroy the incentive for customers to shop around for cheaper tariffs making the market even less competitive.
"Ultimately expensive bills are caused by high wholesale prices and bad regulation, not profiteering – energy firms are no more profitable than similarly sized companies in other sectors. If the Prime Minister really wants to cut energy bills, she should go for competition and make switching easier and more attractive for billpayers."
For further comment or to arrange an interview please get in touch at firstname.lastname@example.org,
Latest News from
JRF - Rising prices and the benefit freeze make families £500 worse off14/12/2017 12:35:00
Ashwin Kumar, Chief Economist at the independent Joseph Rowntree Foundation, commented on yesterday’s inflation figures
IFG - Government must act on public inquiry recommendations14/12/2017 11:35:00
Government has spent £639m on public inquiries over the last 30 years and increasingly relies on them to examine major incidents and tragedies. But a new report finds that the process for following up on recommendations is inadequate.
Demos - New research finds Brits believe citizens, not state, should pay for retirement14/12/2017 10:35:00
A new report from Demos think tank shows that more than 57 per cent of the public believe that the individual has greater responsibility than the Government in meeting the costs of their care. And yet, the research reveals that there is a gap between citizens’ expectations and the realities of the preparations they will be able to make for their futures.
JRF - Low-paid sectors hit hard by falling real wages14/12/2017 09:35:00
Ashwin Kumar, Chief Economist at the independent Joseph Rowntree Foundation, responded to yesterday’s labour market statistics