The freedom to set interest rates merely according to domestic needs is a cruel mirage. Monetary union protects economies from the vagaries of speculative capital flows, enabling more stable growth and investment.
The government needs to work “harder and faster” to bring down energy bills, the prime minister has said ahead of a summit on gas and electricity prices.
Meanwhile, “green taxes” are already adding 5% to our electricity bills, and that is expected to triple over the next few years.
Obviously, when the government itself is deliberately adding to electricity bills, it is a bit rich for the Prime Minister to be saying they need to “work harder and faster” to bring down those bills.
But it is even more stark than that. The purpose of the green taxes is to increase our bills. They are not in place to raise revenue. They are there to encourage people to use less energy by increasing bills.
The government is using green taxes to increase energy bills, to reduce consumption, while at the same time putting pressure on suppliers to reduce bills.
Even on its own terms, the government has two directly contradictory policies on energy. They want cheaper bills – and they want more expensive bills.
What is more, this is not a case of one part of government pursing one policy, while another works in the opposite direction. The Energy Secretary is Chris Huhne. It is he who has been pursuing both these contradictory policies.
Mr Cameron may get nice headlines today for standing up for hard-pressed consumers. But in the long run, as Mr Huhne’s demonstrably ridiculous policies unravel, Mr Cameron may rue the day he became drawn into the whole mess.
In an amazing insight into the Alice in Wonderland world in which he inhabits, he said:
It’s not fair that big energy companies can push their prices up for the vast majority of their consumers, who do not switch, while introducing cut-throat offers for new customers that stop small firms entering the market.
That looks to me like predatory pricing. It must and will stop.
It gets worse. As well as blaming the energy suppliers for the costs of his own green energy schemes, he even tried to claim that greener is cheaper:
He also said it “makes sense” to reduce reliance on expensive oil and gas and promote instead low-carbon energy businesses.
Friends of the Earth energy campaigner Donna Hume chimes in with this:
It’s right that people should be able to switch tariffs and companies more easily, but this won’t ease householders’ pain in the long run, with all six major energy firms putting up prices and the cost of gas rocketing.
Behind closed doors, the energy companies are attempting to lock us into expensive gas power plants for the next two decades instead of investing in the home-grown clean energy that could keep our bills stable and cheaper in the long run.
Just for the record, Donna, oil and especially gas are significantly cheaper than your favoured windmills – and many times cheaper than your solar panels. Like 5 times cheaper. Solar power costs more than 50p per unit.
The green nutcases like Mr Huhne and Ms Hume think that if they repeat often enough that green is cheap, everyone will believe it.
There may be reasons to accept the higher cost of green energy, for environmental reasons. (Regular readers of this blog will know that I don’t accept those reasons, but many do.) But to actually argue that green energy is cheaper is either stupidity or, quite simply, lies.
And Mr Huhne is not stupid. Which can only mean one thing.
Consumers don’t have to take price increases lying down. If an energy company hits you with a price increase, you can hit them back where it hurts – by shopping around and voting with your feet.
The big six only have a few minnows snapping at them, who are kept artificially small. By scrapping red tape for small players they can become serious challengers and help keep bills down.
5th September 2011: the Daily Telegraph carries a most interesting letter from Downing Street advisers to David Cameron, outlining the impact of government energy policies on electricity bills:
Policy costs currently make up around 10% of the average household energy bill
which equates to a cost of just over £100.
The letter goes on to say that
It is notable that supplier company costs and profits are a material, but not hugely significant, factor (around 15% of the average bill).
With the government taking 5% VAT as well, that means the government itself is adding as much as the total costs and profits of the companies who actually supply the energy.
But it’s going to get worse. The letter goes on:
[The Department for Energy and Climate Change]‘s mid-case gas price scenario sees policies adding 30% to consumer energy bills by 2020 compared to a world without policies.
So the government’s impact on our bills is going to double within just 9 years, as their “policy” impact triples.
But after all, you can vote them out, can’t you? You can, in fact, “hit them back where it hurts – by shopping around and voting”. The problem is that Labour are, if anything, even more keen on adding to our bills with “green” measures. The Big Three political parties all have much the same policies of increasing energy costs.
Of course, the “first past the post” electoral system keeps their rivals “artificially small”. In fact, the big three political parties “only have a few minnows snapping at them”. In a proportional system, UKIP, for example, would have around 20 seats in the House of Commons.
To misquote that nice Mr Huhne:
Consumers don’t have to take price increases lying down. If a political party hits you with a price increase, you can hit them back where it hurts – by shopping around and voting them out of office.
The big three only have a few minnows snapping at them, who are kept artificially small. By scrapping the unfair electoral system for small players they can become serious challengers and help keep bills down.
But of course, that’s entirely different. Isn’t it?
This was in response to a Sunday Telegraph article, which said that his plans for the expansion of nuclear and wind power would add 30% to household electricity bills over the next 20 years.
Mr Huhne reckoned that was based on “rubbish” calculations. Why? Because they “did not take into account the eventual savings these different energy sources would bring”.
“Eventual savings”?! Maybe he thinks the nuclear power stations will be a cheap way of turning the windmills when the wind is not blowing.
He had the gall to point out that in France, energy prices were rising by only 3%, because of “a greater use of low-carbon and renewable sources”. That is simple spin. The low carbon and renewable soources he had in mind amount in fact to just one source – nuclear power. More than 80% of France’s electricity comes from nuclear.
Those “low carbon sources” he was praising in France are nuclear power stations. And those low costs exclude most of the actual costs of nuclear power – which are in decommissioning old power stations and disposing of nuclear waste.
In Mr Huhne’s world, nuclear is cheapest. And it is – if you exclude most of the costs.
So what about Mr Huhne’s plans for the UK? He wants to build a total of 8 new nuclear stations in Britain. They will replace Britain’s current nuclear stations as they come to the end of their lives.
However, once they reach the end of their lives is when the real costs begin. Two thirds of the cost of nuclear power comes from decommissioning the stations when they are worn out, and from waste disposal. The government is picking up the tab for all of that – in other words, anything we might save as electricity consumers, we will end up paying as taxpayers.
Save? What am I talking about? Even discounting two thirds of the real costs, nuclear power is still more expensive than gas-fired power.
Regardless of the safety case, nuclear power is massively expensive. That is why private sector companies will only build nuclear power stations if the government picks up those decommissioning and waste disposal costs – and even then require the government to guarantee the price of the electricity they will produce.
Nuclear power was developed for just one reason – to make the materials for nuclear bombs during the Cold War. Electricity was a by-product, useful for defraying the costs of the ballistic missile warheads.
Don’t even start on Mr Huhne’s windmills. They’re great if consumers are nice enough to use power only when the wind is blowing at the right speed.
Wind power is also highly competitive in Mr Huhne’s world – because he imposes extra taxes on other kinds of power, and gives a subsidy to wind.
Mr Huhne is also spending £11.3 billion of other people’s (which means our) money on putting a smart meter in every home, so that we can all see that we are using less electricity if we turn our appliances off.
All this pales into insignificance, of course, compared with Mr Huhne’s master stroke of his FiT scheme, under which the government makes it worth people’s while to generate power from solar panels, at a real cost of around five times as much as conventional power.
And yet Mr Huhne himself rejected the Severn Barrage, which would have produced tidal power from the Severn Estuary at a far cheaper cost than nuclear. At the time
the [government's] feasibility report found it would be difficult to attract private investment and the project represented “high risk”.
Whereas nuclear power stations, for which the government is picking up two thirds of the bill, are “funded by private investment”.
Here is what the Telegraph itself had to say on the matter:
[The government] believes switching to nuclear and wind makes sense because European Union-led taxes on gas and coal power generation will increase the costs of fossil fuel generation.
Combined with further green taxes, such as the European emissions trading scheme, and extra upgrades to the UK’s electricity network, the measures could see Britain’s gas and electricity bills rise more like 50pc – or £500 – according to Ofgem, the energy regulator.
Thus it appears that Mr Huhne’s “eventual savings” that he is promising from his lunatic energy policy, consist of avoiding EU penalty payments that we could avoid quite easily by leaving the EU. Mr Huhne would never countenance that, of course, because as well as being an incompetent Energy Secretary, he is also a fanatical Europhile.
The government’s energy policy is an utter, complete, dog’s breakfast. And Mr Huhne is the man responsible.
How long before David Cameron has the guts to sack him? Dream on. Mr Cameron loves those windmills and those nuclear power stations, and indeed the EU, every bit as much as Mr Huhne does.
The government is planning 8 new nuclear power stations, on the sites of existing ones. Mr Hendry said that they would provide low carbon electricity as coal-fired stations close down.
That is pretty disingenuous, in fact, as he omitted to point out that the existing nuclear stations will be shutting down over the same period. In other words, these new nuclear stations will simply replace the existing ones.
More importantly, though, the decision was clearly not made by Mr Hendry. He is not the Cabinet Minister concerned. The Cabinet Minister involved in this momentous decision is Mr Hendry’s boss, leading Liberal Democrat Chris Huhne.
Perhaps he would say that the decision was made by the whole Cabinet, and not just by him. He ought to tell us, then, whether he himself supports the Cabinet decision. He won’t, though. He will wheel out Mr Hendry to take the flack for the nuclear power, while he himself goes for the photo opportunities with his beloved windmills.
Last October, the government announced that the Severn Barrage scheme was being scrapped. This was a tidal power scheme, that would have built a huge dam across the Severn Estuary, providing up to 8GW of green electricity (with an average of 2GW).
The government claimed that they were simply refusing government funding, and that the private sector would be welcome to build the Barrage if it saw a business case. Their position on the nuclear stations is on the surface similar, but all is not as it seems.
First, the government’s figure of £50 billion to build the nuclear stations does not take account of decommissioning costs at the end of their life, or of the cost of disposing of nuclear waste. Those things will be picked up by the government, using taxpayers’ money.
What’s more, the government is promising the nuclear industry a fast track planning process, to get approvals to build the stations. No such promise has been made for the Barrage.
The government is supporting nuclear, but it is not supporting the Barrage. Mr Huhne is part of the government, and the Minister responsible.
We should pin the decision to build those nuclear stations squarely on Mr Huhne. He will find it excruciatingly uncomfortable. After all, the real reason he rejected the Severn Barrage was that his good friends in the Green movement hate it (because it involves engineering and is a large scale project).
So let’s see you step up and defend this decision, Mr Huhne. Tell us why you want new nuclear power stations, but don’t want the Severn Barrage.
Mr Huhne’s legacy as Energy Secretary, it seems, will be a heap of pretty useless windmills, and a set of shiny new nuclear power stations.