Nick Clegg gives ground in coalition row over green energy levies

October 26, 2013 by  
Filed under Green Energy News

Link to video: Nick Clegg: we’ve got to help the poor with their energy bills

Nick Clegg has opened the door to a possible resolution of the coalition dispute over energy prices, saying he is willing to see the burden of some of the green levies shifted to general taxation and away from energy consumers’ bills.

David Cameron had stunned the Liberal Democrats by announcing he was going to roll back the environmental levies, giving Nick Clegg 30 minutes’ notice of his plan to make the announcement at Wednesday’s prime minister’s questions.

But Clegg’s aides noted that schemes to help the fuel-poor, such as the Warm Home Discount scheme worth £135m to two million poorer customers, would be more progressive if funded by general taxation rather than a flat levy on consumers.

Referring to the Warm Home Discount, Clegg said: “We could perhaps fund that through general government expenditure, rather than through one of those levies, but one way or the other we do need to help those two million families with their fuel bills. I do not want to turn our backs on the poorest in society. I don’t want to turn our back on the environment.”

Clegg’s comments came as Scottish Power became the fourth of the big six energy firms to raise prices – this time by 8.6% or an average of £113 for dual-fuel customers. Gas prices will rise by an average 8.5% and electricity 9%, with the company blaming some of the rise on levies.

Clegg’s aides suggested it would be a struggle to reach agreement on all the levies ahead of the autumn statement in December, since the multibillion-pound cost means a simple transfer of the whole cost to the taxpayer would blow a sizeable hole in the government’s finances.

The Lib Dems also believe some levies are best left funded as at present.

Lib Dems have long said the carbon price floor, a tax on fossil fuels introduced in April by the chancellor George Osborne, is the least green of the many levies, as well as being reviled by industry. But it is set to raise £4bn over three years for the Treasury, making its abolition highly expensive. The electricity industry wants the reform of the Energy Companies Obligation, which supports energy efficiency in poorer households and is due to cost £2.5bn. There is a dispute about whether the industry is exaggerating the cost of implementing the scheme designed to improve home insulation.

Clegg continued to insist that many of the levies would reduce bills in the medium term by making homes more energy efficient.

Energy secretary Ed Davey said the big six energy firms would pay for the price hikes by losing market share.

He said: “With 15 independent energy suppliers to choose from outside the big six, it’s surprising that these companies think they can keep getting away with bill hikes of this magnitude. As more and more people shop around for the competitive deals on the market, some of which are offered by the independents, companies like Scottish Power can no longer put their bills up in this way with no consequences.”

David Cameron, speaking in Brussels, said switching energy suppliers can help people [save] up to £250. “We’ve also got to look at the taxes and charges and things that are added to people’s bills to see if we can reduce the cost of those.” Labour said it was willing to consider some green levies being switched to general taxation, but said the priority was the behaviour of the energy companies. Ed Miliband said: “Yesterday, in weakness and panic, the government made up a new policy on energy. Today, Nick Clegg has revealed their true intentions: to shift the burden from ordinary bill payers like you to ordinary taxpayers like you.

“Governments have always looked at this balance, but this government wants you to pick up the tab for its failure to stand up to the energy companies … They propose a panicked wheeze paid for by taxpayers. We offer a real freeze paid for by the big energy companies.”

Clegg revealed his office had been given as little as 30 minutes’ notice that Cameron was to announce a rolling-back of the green levies. Discussions within government had been confined to stress-testing the levies for efficiency, not rolling them back, he said, adding that he was still not clear what Cameron precisely had in mind. He added: “There was a new theory on the right of British politics that it is all the fault of us caring about the environment.”

In a sign of the political difficulties for the government as winter sets in and the electricity price rises bite, the government will set out on Friday advice on how to keep energy bills down.

The Cold Weather Plan for England says people should keep homes warm, with living-room temperatures of 21C (70F) and bedrooms, and the rest of the house heated to 18C (65F). It says temperatures above these “may waste money” but anything below them “may risk your health”. If people are unable to afford to heat all their rooms, it suggests they should heat their living room during the day and bedrooms just before going to bed.

The plan was published by Public Health England (PHE). It claims there are over 24,000 avoidable deaths each year in England and Wales. The causes are complex, “interlinked with fuel poverty, poor housing and health inequalities, as well as circulating infectious diseases, particularly flu and norovirus, and the extent of snow and ice,” it added.

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