‘Net zero’ may become as divisive as Brexit

Since last October, the average household fuel bill has been capped at £1,277. Earlier this month, surging wholesale gas prices saw energy regulator Ofgem increase that cap to £1,970 – a rise of no less than 54pc, affecting around 22m households.

In less than two months, then, utility bills will spike by around £700 to almost £2,000 a year. And that’s for the average household. Homes using above average amounts of energy will pay more.

Chancellor Rishi Sunak has unveiled a raft of utility-bill support measures including council tax rebates, fuel bill discounts and an extension of means-tested benefits. The package is overly complex and will help far less than ministers claim. The council tax cut, for instance, only applies to lower-valued properties in bands A to D – very few of them in the South East, where there are still plenty of cash-strapped households. 

Other discounts don’t apply until October, by which time wholesale fuel prices could yet be even higher, and involve unsolicited debts with electricity providers that must then be repaid.

When these April utility bills hit the nation’s collective doormat, we could see not only mass protests, but widespread non-payment as well. The political atmosphere will get nasty – not so much a winter of discontent, as a spring rising.

And there’s another dog that has yet to bark when it comes to this energy price crisis. Households are at least partially protected by Ofgem and the Chancellor’s support measures, such as they are. The vast majority of businesses are not.

Stephen Morley is president of the Confederation of British Metalforming, a trade body comprising hundreds of companies, employing tens of thousands of UK workers. These are firms at the heart of our manufacturing sector – and they use a lot of energy.

Late last month, Morley wrote to Kwasi Kwarteng, the Business Secretary, rightly pointing out that “while there are geopolitical issues at play” when it comes to explaining high energy costs, “the Government is not faultless”.

Wholesale gas prices in the UK are indeed considerably higher than across many other European countries – and way above those in the US. This reflects our lack of gas storage, an aversion to exploiting our own energy resources, not least in the North Sea, and years of drift and complacency from successive governments when it comes to energy strategy.

Our rush towards “net zero”, and related taxes on commercial energy users, also helps explain why, as Morley wrote to Kwarteng, the increase in fuel bills faced by UK businesses is “substantially more than those of our EU competitors, specifically France and Germany”.

Last week, when I spoke to Morley, he told me that his members “are seeing electricity prices go up by 100pc-150pc, with gas prices up three or four-fold”. While very high-intensity energy users, like steelmakers, get some protection against spiralling prices, Morley explained that “most manufacturers don’t – and then we have to pay renewable obligations on top of that”.

This energy crisis, then, is threatening the future of countless firms based largely across the Midlands, Yorkshire, the North West and North East, employing numerous workers in Red Wall constituencies. These are the seats Johnson won from Labour in the December 2019 election, seats he must hold to retain his parliamentary majority.

Charlie Alexander, founder of Bleikers Smokehouse in the Yorkshire Dales, operates at the other end of industrial scale, producing  high-quality smoked fish.

“My energy bill is set to at least double from £120,000 to £240,000,” he told me last week. “For a relatively small business that’s a huge increase – plus our packaging and distribution costs are also spiralling upward.”

When the January CPI inflation number is published on Wednesday, it will be considerably higher than the December figure of 5.4pc. That rise will be driven largely by the reality that businesses are facing huge input price inflation, not least energy costs.

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