Labour’s Hypocrisy on Rising Energy Bills

If you go to the Labour Party’s website there is an announcement.

Clicking down will take you to energy price calculator. I found out with Ed’s policy I could save £112 per year.

Two weeks after the announcement, still no links to the actual plan, but there is a video to watch.

Just one minute and twenty-six seconds for a distinguished actor to say the following:-

How do you feel when you see your energy bill sitting at the front door and you know that it is going to be even higher than the last one?

And how do you feel when you read in the newspaper that your energy providers’ profits are up yet again?

Millions of ordinary families are struggling to keep up with bills. Bills that are rising faster than wages.

Since David Cameron became Prime Minister, he’s allowed gas and electricity to rise by an average of £300 a year and sat by as energy companies make record profits. Under this Government a privileged few come before hard-families. Ed Miliband and Labour are going to change that. Ed’s energy plan will mean a tough new regulator with the power to challenge the energy companies and keep prices down. Under Ed’s energy plan gas and electricity bills will be frozen. That’s right frozen. Under the Tories you have overpaid. Labour will fight the cost of living crisis and build an economy that works for working people.

The inference is that your bills are rising solely due to the ever-increasing profits of the energy companies. Further the nasty Tories had it in their power stop it. Along will come Labour and stop all that.

I have looked up the figures. Since the 2009, the energy regulator OFGEM has required the six big energy companies to produce financial data by five segments. That is for electricity generation, along with supply data for electricity and gas, each split between domestic and non-domestic supply. I have analysed all four years of data for the six companies, using links provided by OFGEM. There is, of course, no financial data available for 2013 as the year has yet to finish.

If Labour are correct in their inference of price rises being due to increasing profits then profits will be increasing as a percentage of sales. With the typical household’s bill rising by over 20% between May 2010 and the end of 2012, profits as a percentage of revenue would be rising sharply. The following shows the percentage components of revenue.

The narrow band in purple for profit increased from 1.8% of sales to 3.8%. It is not increasing profits that have caused the price rises. The reason for doubling is because, in total, the six major companies lost money on gas supply in 2009. Nor is there a sharp difference between domestic and non-domestic supply margins. You could claim that the energy companies are making more money on generation instead. They are not, as the full margins, by segment, by year, show below.

The total sales breakdown enhances the picture.

Although total are broadly the same in 2009 and 2012, revenue from domestic customers was 13%, whilst that from non-domestic customers was 17% lower. The reason Labour have a higher figure is they rely on OFGEM’s notional average user, who uses the same amount of energy year-in-year out. Real hard-working families have responded to rising prices by reducing consumption.

What is most important is why unit costs have risen. Labour are correct when they say it is not due to the wholesale price of energy. As already demonstrated, they are incorrect to say it is due to rising profits. The real reason is “other costs”. These rose from 32% to 40% of revenue in just four years. That is from £14.1bn to £17.7bn in just four years or a 25% increase. On declining volumes this is more significant for consumers.

These figures are corroborated by a breakdown by my energy supplier, Scottish Power.

With VAT at 5%, the Scottish power says that its charges to the domestic customer in 2013 are made up of 53% for fuel and 43% for other charges. This compares to the industry average in 2012 of 55.7% for fuel and 40.6% for “other costs” plus “amortization”. The higher proportion of other charges to domestic customers is to be expected, as small domestic customers have lower costs. The relevant domestic figures from the big six are 51.8% for fuel and 44.0% for other charges. Given the obviously rounded Scottish Power figures, they are remarkably close to the industry average.

The supply market is fiercely competitive, hence the real reason for the ability of customers to save money by switching suppliers. Therefore it is doubtful that internal costs will have risen. What has risen is the delivery of the energy to the home (National Grid, local delivery, and cost of meters), along with green levies. So it is likely over 75% of the price increases to the customer are due to factors outside of the energy supplier’s control.

Where does responsibility lie for the above-inflation price increases?

The dash for “clean” energy to save the planet is enshrined in the Climate Change Act 2008. It was pushed through the House of Commons when Ed Miliband was Environment Secretary. This accelerated the growth in green levies and the requirement for a more extensive grid network to carry the wind-generated electricity from remote turbines. Delve further in the profits on electricity generation and you will find that fossil fuel generation has margins of 10%. A price freeze will eliminate the supply profits in six months, and the generation profits in two years. The is a sure way to get a near monopoly in gas supply, and cause the rapid shut-down of three-quarters of generating capacity. It is an act of gross hypocrisy by Ed Miliband to threaten to destroy a competitive industry to remedy a problem that he is responsible for.

 

NB First time comments are moderated. The comments can be used as a point of contact.

Kevin Marshall

Cameron gets the message on the Legacy of Labour

David Cameron yesterday started blaming the current deficit problems on the last Labour Government.  Benedict Brogan on his Telegraph Blog quotes Cameron

 “I think people understand by now that the debt crisis is the legacy of the last government. But exactly the same applies to the action we will need to take to deal with it. If there are cuts – they are part of that legacy.”

I have been thinking along the same lines for a while now. See for instance.

http://manicbeancounter.wordpress.com/2010/03/21/the-impact-of-labour-on-the-current-crisis/

http://manicbeancounter.wordpress.com/2010/03/22/the-economic-legacy-of-labour-a-summary-for-the-tories/

http://manicbeancounter.wordpress.com/2010/03/24/the-golden-rule-has-lead-to-economic-ruin/

http://manicbeancounter.wordpress.com/2010/04/04/labour-bashing-business-to-save-facing-their-awful-reality/

I believe it is as important for the future to understand the political element of how Labour went so wrong. The Golden Rule and the denial of the problem until it was too late have made a serious recession into a painful period of painful cuts in expenditure and large tax rises. This nation will be poorer for a generation as a result.

Please Pray for Gordon Brown

After the events of last week (see here, here and here), I feel quite sorry for there appears to be a divergence between the public and private face of Gordon Brown. Christians attempt to reconcile these differences in their own lives through prayer, studying the bible, public worship and seeking God’s unconditional forgiveness for when they have made mistakes, or erred in the smallest way. The Labour doctrine of spin, I would suggest, tries to fudge, evade and deliberately obscure anything that contradicts their message. When there are is strong underlying growth and charismatic leaders to promote populist policies, then this spin doctrine can carry people along. But when the main thrust of future policy is recognized to be inflicting hardship then it becomes quite difficult to constantly put out positive messages. Instead Labour have chosen to maintain the upper ground by a constant barrage of negative, exaggerated or misleading statements about their major rivals.

            Whilst many would recognise the impact the slogan of “Labour Investment verses Tory Cuts” has had on delaying recognition of the crisis in the public finances many months, what is not recognised is the impact on those in the party. If they put a slant on policy that is fundamentally at odds with what they believe – genuine public service – it will eventually be personally damaging. Maybe some, like Ed Balls and Peter Mandleson, who are more thick-skinned and less ideologically-motivated, the conflict between the good of the party and the greater good of the nation does not seriously trouble them. But Gordon Brown is committed to serving the country and has always believed he is the most able to lead it. Until the downturn this justified his ruthlessness in the pursuit of the top job. He is also astute enough to realise that not only did he get bank regulation wrong, but that his justification of structural deficits (see here) has left the government finances in their most wretched state for over 30 years. In so doing he knows that public services will have to be cut and then constrained for a generation.

            So when you hear of Gordon Brown’s throwing Nokias, or calling a straight-talking pensioner a bigot under his breath, please pray for him. Pray that he may know Christ’s love and forgiveness, and turn away from the lust for power and the love of spin. Most of all pray that he may have time for rest and reflection.

Cutting the Deficit – The PR aspect for the Tories.

There is growing recognition that the job of cutting the deficit will destroy the electoral prospects of those carrying out the task for a generation. Capitalists at work, have (very much tongue in cheek) suggested that a war might be needed to save the next government, much as the Falklands boosted the Tories and helped win the 1983 General Election. A war would certainly help, but such a dreadful circumstance should not be wished upon the nation. The Falklands War was a minor skirmish with a decisive victory that helped topple a dictatorship.

Another way is to encourage the general public to despise Labour – something that Cameron has avoided. There is plenty to go out, for instance:-

  1. The structural deficit (the bit that needs to be closed) is Brown’s fault. I estimate by 2015, around £750bn (over 50%) of the national debt will be as a consequence of the deficits built up in the boom years.
  2. Uncovering the partisan attitudes of the civil service and the political appointees. Encouraging whistleblowers and conducting audits may help.
  3. Launching enquiries and audits into major projects – for instance the widening of the M25, the NHS computer system, GPs pay rises, estimating the cost of Brown’s raid on pensions, why the banks got out of line etc.
  4. Tories emphasising unconditional forgiveness to those who have been taken in by the Labour Spin doctrines that got us in this mess.
  5. Emphasize that Labour have betrayed their core voters.
  6. Launching the initiatives to minimize the pain and maximize the gain from the necessary cuts.
  7. Changing the emphasis from promoting the interests of party/ideology to the government serving the people.

 

The Tories should do this not only to drive home the contribution that Labour has had in our current crisis, but also to give a positive vision for the future. One where governments will learn from past mistakes and learn the limits of what they can accomplish.

Conservative bloody battle imagery is self-defeating

Centre-Right’s “Labour is down, and its throat is exposed. Finish it.” imagery is quite wrong – it will just drive people away from politics altogether, Much like Foot’s “Thatcher-Tebbitism speech”.

In the final days it is worth emphasising the negatives of the Labour Party and after the election bringing people into a positive image of the challenges ahead.

THE NEGATIVES.

1. The Raiding of Pensions.

2. Creating a Structural deficit in the Boom years – This is the bit of the deficit that now needs to be cut. Labour has betrayed its core voters.

3. The selling of Gold reserves shows poor judgement.

4. The fact that Labour has only tiny positive things to say, and a huge amount of venom.

5. The poisoning of the civil service, by partisan decision-making and political appointees.

THE POSITIVES

1. Cuts in services must be prioritised.

2. Old-fashioned value-for-money needs to be the core.

3. Government should Serve the people, not the interests of party.

4. Diversity in provision should be encouraged to make the best use of everyone’s talents. (As opposed to constant initiatives from a few inexperienced spin-doctors).

The Conservatives final dash for power should lay the foundation for removing the divisiveness and nastiness of the Brown Premiership, along with sorting the parlous state of the finances created under the Brown Chancellorship. This will only happen if the supporters of this era are encouraged and able to join in a better way.

The Two Faces of Labour

The gaffe and very humble apology later by Gordon Brown may have a significant impact on the General Election. But, as I wrote on John Redwood’s blog, there is a deeper public v private face to the Labour campaign.

In recent years our politics has become too like those of the countries that have defaulted in the past – like Brazil, Argentina and like Greece has become now. It has become about presenting a public face of concern and competency, whilst privately just wanting power and prestige. It is also about defending of that image by denigrating the opposition and distorting the reality of events to an extent that George Orwell would not have imagined.

 As a result, we had a structural deficit built up in the boom years and a refusal to recognize that growing debt was an issue. We have delay upon delay about tackling the issue, or even recognizing the problem. Now every minor proposal to tackle it is met with cries of destroying public services and ruined lives.

 The false face of the boom years and the delayed recognition means we have a much bigger problem. It will mean more painful cuts and more growth-damaging tax rises. However, like with personal debt problems, being open and honest there is a severe problem is the first step to solving it. Then you prioritize what is most important, both by area and within each area. That priority should be based on meeting needs – on serving the public – and not on maintaining jobs.

 As part of that recognition, we should divide the deficit between the structural part (using OECD guidelines) and the cyclical part.

 Like with a financial plan for families who have got into debt, we can see, year-by-year, how that deficit is reducing. It should not be enshrined in law, but at least will show how the pain of narrowing the deficit is bringing the nation back to financial health. Then we can also explain how targets are not being met – e.g. through growth faltering, or failing to meet targets.

We need, as a nation, to admit to the false face that all put on. We should now shun the spin, and recognise the poor state of the public finances so that we can repair the damage with the minimum of adverse consequences.

Why Labour has not the Courage to cut Public Expenditure

18 months ago, I voted on the Congestion Charge. I went into the ballot box having been promised  

 ‘There’s no Plan B. If we vote NO in December the money goes back to Government, all £3 billion of it.’

  See wevoteyes facts 09 Nov 08

I was one of the 812,815 who voted against, a staggering 78.8% of the votes cast.

Depite this promise, six  months later Manchester gets the Metro extensions – the big ticket item. Costing £1.4bn. South Manchester Reporter had the story here.

 

We now have a huge deficit to tackle. If Gordon Brown cannot keep to a firm promise in the face of strong opposition, how resolute will he be on the unspecified commitments to cut the deficit?

 NB the pdf is from wevoteyes.co.uk. This website has now been taken down. For the full story see http://en.wikipedia.org/wiki/Greater_Manchester_congestion_charge

Risk, Volcanic Ash, Regulation and the Leaders debate 2

John Redwood today makes some brilliant observations on “Bash the banks and Praise the Regulators”. His comparison with the ash cloud and the banking regulation is particularly apt. But it is not just the cost of inappropriate regulation that there is a similarity. The leaders’ debate of tonight showed crystallised the issue for me. It is how do the authorities deal with an unprecedented situation? The risk-averse say let us do nothing until there is full information. On the financial system, nothing was done to control the excesses. On the ash cloud everything was stopped until the scope of the problem could be assessed by the experts.

There is a way of going into the unknown without full information. You set general rules and assess the magnitude of any problem.

-         On the ash cloud, you compare the risk with the size of the eruption, the size of the particles and the distance from the volcano. From this, you would have found no evidence of large jet aircraft getting into emergency situations 1,000 miles from an eruption, in an ash cloud that is hardly visible.

-         From the financial system, the situation was evident that house prices and consumer borrowing was going to unsustainable levels on an unprecedented scale from 2003 onwards. The 0% interest credit cards and the large discounts for changing mortgages were evidence of this in the UK. The sub-prime boom, with mortgages deals agreed whereby in 3 years the borrowers could not meet their repayments was evidence of this in the USA. It was the very magnitude of the problem that should have merited special attention. The action should have been to raise interest rates and increase cash requirements for banks.

On the surface the action was the opposite – One to stop what was already happening, the other that immediately stopped anything from happening. But the cause is the same – by requiring detailed rules and acting on how others will perceive our actions, the authorities took wrong course of action.

 The Leader’s debate crystallised it for me. There was one leader who stood out. His reaction to any problem is not to take any risks.

-         He will not risk safety by letting planes fly.

-         He will not start cuts now to risk the recovery.

-         He will not risk banks ever getting into trouble again.

-         He will not risk a foreigner being unidentified.

-         He will not risk existing jobs.

-         He will not risk offending our European neighbours by disagreeing with them.

-         He will not risk independent MPs, by banning them from second jobs and monitoring every penny they spend.

-         He will not risk independent thought, by stipulating what religions should believe.

-         He will not risk diversity in education by allowing independent schools to be formed in the state sector.

 In so doing, after another 5 years of his leadership we will have no recovery; we will have no decision-makers in government – just be taking orders from Brussels and the IMF; we will have no risk-takers in business as most will not want to overcome the ever-higher regulatory hurdles for achievements that are taxed away and vilified.

We will also have no future.

Iceland’s Volcanic Eruption in Perspective

A couple of days ago I wrote on John Redwood’s blog

“Nowadays we appear to be too risk averse. The two examples of aircraft suffering from engine failure as a result of flying through an volcanic ash clouds were both (most probably) within a few miles of the volcano. The current volcanic particles could be bigger, but the density of the clouds will be lower a thousand miles or more from the volcano. The risk to an engine going down is very small, especially if the more concentrated areas are avoided.”

In today’s Times, under “Government ‘too cautious’ over ash cloud, Adonis admits” we have the following:-

“Britain was among the last European countries to lift flying restrictions as the first flight touched down at Heathrow just before 10pm yesterday.”

Last night the Civil Aviation Authority accepted evidence from airlines and manufacturers that flights could pass through low-density ash cloud without risking passengers’ safety

“Mr Brown said: “You have got to make sure that people are safe and secure.”

“We would never be forgiven if we had let planes fly and there was a real danger to people’s lives.”

 

I am not a scientist, merely an accountant who tries to put things in perspective. What drives Gordon Brown’s thinking is not to be perceived to be taking risks. This has cost us dearly in the reaction to terrorist attacks (even incompetent ones like the shoe-bomber and someone setting fire to their underpants); the reaction to swine flu and the reaction to climate change. Good decision-making is not a matter of how it will be perceived, or waiting until the evidence all goes one-way. Good decision-making through assessing the magnitude of risks with limited information.

Labour “Has Got Us Lost” Party Political Broadcast

Iain Dale’s first impressions of Labour’s new Party Political Broadcast “The Road Ahead”

I have an alternative impression.

This is a solitary guy who seems to have gone for a walk on unfamiliar bleak moors without a map, or compass, or drink, or food and no idea of where he is going. He was not prepared for the journey.

As such he could easily get into trouble and need rescuing. Alternatively, if the weather turned, and with no phone he could die of exposure. However, most likely he will only end up exhausted with sore feet, wiser for the mistake.

Britain entered this recession with a structural deficit. It was not best prepared for the banking crisis and recession. We then had a Prime Minister who had spent years isolating himself from contrary opinions, and so had to make decisions on his own. As a result of his imprudence, we Britain may need to be rescued in the near future, no matter who gets into power. Most likely, in a few years, we will emerge a nation weaker as a result of imprudence, but wary of ever electing a Labour government again.

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