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Labour ready to gamble on Miliband's price freeze gambit

Alex Stevenson

26th September 2013

With 20 months to go until the next general election, Britain's energy policy debate is already heating up, reports Alex Stevenson.....

After a summer of intense arguments over the relative merits (or not) of fracking, the conference season is seeing environmental headaches beginning to dominate the news agenda - including an important decision by the Liberal Democrats to embrace nuclear energy at their autumn gathering in Glasgow.

With the latest report from the Intergovernmental Panel on Climate Change reminding our leaders once again of the climate change imperative, the focus this week has turned to Brighton and the Labour conference. What would Ed Miliband do, we asked ourselves, to try and address huge frustrations with the coalition's current approach?

The answer is Miliband's boldest policy yet.

But amid the excitement at Labour's first price freeze for decades, anxiety is already growing that the demonised 'big six' energy companies are going to fight the opposition hard.

One thing is clear. The proposal to rush legislation through the next parliament, paving the way for a 20-month price freeze lasting until New Year's Day 2017, has electrified the party.

Activists are convinced the move will be a real vote-winner. The freeze was pre-tested with focus groups who claim it is 'off the charts' in terms of its electoral potential.

Economic tracking data from YouGov appears to back this up. Eighty-three per cent of the public feel energy suppliers maximise profits at the expense of customers, while over half agree that "energy companies treat people with contempt".

Although this is a fight which makes sense for Labour, though, it could still be one that Miliband ends up losing.

The opposition already accepts it has lost the battle of the initial headlines, after British Gas quickly warned the policy could result in power cuts.

Ian Peters, its managing director of residential gas, told an IPPR fringe event he believes there is a "risk" that the lights could go out.

This is a grim threat. The danger is the extreme market volatility seen in 2008 could repeat itself during Miliband's price freeze, prompting a withdrawal of supplies from energy companies.

"It's back to 1997," said Margaret Beckett, who as trade and industry secretary when New Labour came to power faced "massive pressure" over a moratorium on gas power stations.

She told the Ecologist the 'big six' have to be stood up to.

"It teaches us you've got to stand up to people in power and vested interests who have been allowed to run riot," Beckett believes.

"We didn't change policy, the world didn't come to an end and we carried on getting gas."

Energy lobbyists in Brighton say their sector is being demonised. They reject Miliband's dismissal of the comparison with the grocery industry, dominated by the big supermarkets, and question why they are being targeted.

"We hate the term 'big six'," one dejected company chief admitted. Energy companies are striving hard to win the 'trust test' and admit it's one they're losing. "You have to spend years and years doing the right thing to build a reputation," I was told. "You can destroy that in a moment."

For Labour, that moment came in 2009 when wholesale prices fell by 46% but bills dropped by an average of just five per cent.

"I know some people think energy companies shouldn't make profits," Peters of British Gas said.

"But our profits allow us to invest in Britain's energy future on a huge scale - keeping the lights on and making sure there's gas in the pipes."

Shadow energy minister Tom Greatrex says the losses suffered by energy companies' domestic supplier businesses are more than offset by their huge profits from electricity generation, however.

Labour views the price freeze as the first step in a broader campaign to bring transparency to the energy market.

This approach has the firm backing of the left wing of the party. "I don't believe we have any kind of true feel about what's happening in the energy sector," Katy Clark, a left-leaning Labour backbencher, said.

The opposition's plan would see watchdog Ofgem replaced with a more powerful regulator. It would expect this new body to intervene when companies do not respond to falling wholesale prices.

This long-term agenda risks being derailed, however, by a simple move from energy firms - hiking prices ahead of the 2015 general election to hedge against the risk of Miliband and co getting into power.

"If they did," Greatrex said, "Ofgem have got powers to intervene now, and we'd be pressing them to do exactly that.

"If David Cameron stood back and let that happen, that says a lot more about what he thinks about the pressures on household budgets and businesses."

It would be politically advantageous for the Conservatives to blame Labour's price freeze threat for higher costs before 2015.

Suggesting that to delegates in Brighton prompts an angry response. "If there's unfair price hikes then it is the responsibility of the government in power to deal with that," Clark, the MP for North Ayrshire and Arran, added firmly.

Beckett goes further still. "I think it's all crap got up by the Tories," she said.

"They must be furious they haven't thought of it. Their reaction to any of our policies is to lie about it. I hope people are sensible enough to see through them."

All the talk now is of a dawning realisation that Labour might just be returning to the 1970s. The idea has alarmed Peter Mandelson, who ended Labour's week in the spotlight by warning Miliband's idea could be taking the party "backwards".

Its true the price freeze means rejecting the monetarist consensus of Margaret Thatcher accepted by New Labour, taking the opposition a step towards the principles of a managed economy.

But the Labour grassroots do not seem as interested as the media about the prospect of 'Red Ed' marching Labour off to the left again.

"People aren't sitting here thinking 'we do could with price control'," Bryan Nott, a delegate from Birmingham, said. They're thinking, 'we want to pay less for our energy'."

Adopting a more radical approach might just rescue Labour from its mediocre performance in the polls, too. "There's this obsession that we have to stay on the centre ground," Nott added. "If we do that the Tories don't have to show their true colours."

Complex arguments about markets and profit margins will dominate the debate in the Westminster bubble throughout the next two years.

They are not going to bother the grassroots much. Labour's focus is on the political gains to be made from the price freeze.

As Len Tippen, Labour's chief in south-west Hertfordshire, put it: "It will go down well on the doorstep.

"This is a battle that needs to happen. We don't want large numbers of people having a choice between putting the heating on or buying a loaf of bread."

The party appreciates Miliband's gambit is something of a gamble - but is ready to take the risk to help shake off Labour's midterm malaise.

Alex Stevenson is parliamentary editor of politics.co.uk

Follow him @Alex_Stevenson

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