- Prime Minister Theresa May vowed to cap energy prices to cut £100 from bills
- Mrs May, 60, made the statement which is her first major policy announcement
- Around 17million families on variable tariffs could benefit by up to £100 a year
Theresa May last night pledged to cap rip-off energy prices in a move expected to cut £100 from a typical bill.
In the first major policy announcement of the Tory campaign, the Prime Minister said her manifesto would include a pledge to limit the standard tariffs paid by seven in ten families.
The regulator Ofgem would be given powers to set maximum prices, making it harder for energy firms to punish loyal customers.
Ofgem would review the market twice a year, keeping the cap in line with wholesale energy prices and stopping firms making excess profits. Around 17million families on standard variable tariffs could benefit by up to £100 a year, according to Tory sources.
However some Conservatives question whether a government should fix energy prices. Tory MPs savaged Ed Miliband’s plan for a cap in the 2015 election campaign.
Power firms have warned that competition could be stifled, raising prices in the long run. The manifesto move came as:
– Mrs May brushed aside Cabinet doubts to say her party will retain a key pledge to slash net migration to the tens of thousands;
– Jeremy Corbyn prepared to launch the most Left-wing campaign in modern Labour history, promising a ‘reckoning’ with the rich;
– Vince Cable encouraged fellow Lib Dems to back Labour in some seats to beat the Tories;
– Mrs May urged voters to give her a strong mandate to take on France’s new president Emmanuel Macron, a Europhile who has described Brexit as a crime;
– An opinion poll gave the Tories a 22-point lead over Labour – the largest recorded by pollsters ICM.
Mrs May hinted at the move on energy bills yesterday, telling activists she would pursue ‘deliverable’ policies.
She said these would include protecting workers’ pensions against irresponsible bosses and capping energy prices.
Greg Clark, whose brief as Business Secretary covers the energy market, confirmed the price cap proposal last night.
‘We will act on our commitment to intervene when the energy market fails to treat people in a fair and reasonable manner,’ he said. ‘A recent investigation found that families are paying £1.4billion more than they should in energy bills.
‘And in the past few months, five of the largest energy suppliers have announced increases to their already poor value standard tariffs. This clearly isn’t fair and reasonable and we are going to put it right.’ Ofgem moved last month to cap prices for four million mainly poorer customers who use pre-payment meters.
Energy giants have been accused of ripping off their most loyal customers by leaving them on expensive tariffs that are far costlier than their best deals.
A review by Ofgem last year found the difference between some suppliers’ best and worst deals was worth £300 a year to the average family. An investigation by the Competition and Markets Authority said firms were able to exploit customers who did not regularly switch.
The watchdog accused firms of fixing standard tariffs ‘materially above a level that can be justified by cost differences’.
Will Hodson of the Big Deal, which encourages consumers to switch to smaller providers, welcomed the proposal for a cap. ‘The Big Six make hundreds of millions in profit by overcharging families across the country,’ he said.
‘They’ve had years to put their house in order but always refuse. A price cap will finally force them to do the right thing.’
Suppliers say a cap will reduce competition and encourage firms to ‘cluster’ around the level set by Ofgem. They also claim they will be less able to offer cheap deals to those who switch.
Since October – when Mrs May first floated the idea of a cap – several firms have withdrawn their cheapest deals and pushed up prices.
Yesterday British Gas owner Centrica said: ‘Centrica does not believe in any form of price regulation. Evidence from other countries would suggest this will lead to reduced competition and choice, and potentially higher average prices.’
Former Tory minister John Penrose has urged ministers to limit the gap between best and worst deals rather than setting an absolute cap. Last month he said Ofgem would inevitably get it wrong, adding: ‘Whatever price they set would be permanently out of date, inaccurate, and a dripping roast for lawyers and lobbyists paid by the Big Six energy companies.’
In the 2015 election, then Tory minister Eric Pickles warned that a price cap would lead to energy shortages and power blackouts.