Energy crisis could become a poll tax moment - by Iain Martin for the Times - 03.08.22

Tory leadership candidates seem blissfully unaware of the unrest that may await them in the autumn as bills soar.

Across Europe, the thermostat lights are going out. Sensible governments have begun preparing for restrictions on energy supplies. There are severe shortages in prospect and populations are being primed for the crisis.

In Germany last week the hot water was turned off in public buildings in Hanover. Illumination of monuments will be banned and consumers are being urged to show maximum restraint. The mayor, Belit Onay, says the aim is to reduce energy consumption by 15 per cent.

This week, the Spanish government issued a decree that air conditioning must not be set below 27C, and when the heating comes on in autumn the temperature must not be set above 19C. Shop fronts must have lights turned off by 10pm.

Spain is not even a country particularly badly exposed to Russia’s attempts at reducing the continent to economic ruin. It imports relatively little Russian gas. Still, its government is operating on the wise basis that come this winter all manner of events as yet unforeseen could disrupt the flow. Will there be an outburst of national protectionism interrupting promised deliveries? Could the international situation worsen? It could. Best get people prepared now in case the worst happens.

Meanwhile, in blithe spirit Britain, it is as though none of this is happening. As if we are not connected directly to the European energy market or subject to the fallout.

Amid the Tory leadership contest, the British government appears to have all but stopped functioning. It is effectively in purdah: that is, no significant policy decisions or announcements can be made until the new boss turns up. Incredibly, the prime minister has gone on holiday, even though in early September he will have all the time he wants to lie around watching the Godfather films. For now, with Boris Johnson disengaged, a skeleton Whitehall operation of ministers and officials is keeping the show on the road.

With a hole where national leadership should be, the Tory succession contest becomes ever more unreal. At the hustings the candidates have faced a few good questions from Tory members about the effects of rising energy bills. In response they have pointed to the assistance already announced by the government this year and promised a bit more. Poorer households can claim a £150 council tax rebate. All of the country’s 28 million households will be able to apply for a £400 energy rebate.

But as the financial expert Martin Lewis has pointed out, this help barely scratches the surface, considering the scale of the problem. The Resolution Foundation says in its latest report that energy bills will be 50 per cent higher this winter than they were in spring. The energy price cap designed to protect the vulnerable is expected to be about £3,600.

Lewis has run a heroic campaign for months, attempting to warn cocksure ministers of the impact of these rises. Plugged into one of the most formidable consumer networks in the country, with millions of subscribers to his newsletters and recommendations, he is drowning in tales of distress.

In its latest study, the National Institute for Economic and Social Research describes personal savings and economic security draining away. By 2024, it predicts, a fifth of households will have no savings at all. Already there are the stirrings of a non-payment campaign on energy bills and the prospect of fury with energy firms when they announce more soaring profits.

Liz Truss has signalled she will scrap the planned windfall tax on energy company profits that was designed by Rishi Sunak as chancellor. The foreign secretary is a robust free marketeer, who believes windfall taxes always discourage business investment. Her most robust supporters say she will hold firm and not offer too much fresh assistance.

I wonder. Truss is highly political and will not want to be booted out of office to spare the energy industry. Will a new administration, assailed daily by the opposition, voters and media on energy companies, really say that many billions of extra profits are fine when grannies and the poor are freezing?

Without a lot more extra help and a windfall hit on the energy giants, there is the potential for a poll tax moment and even social unrest.

All of this is to come, although you would not know it from the Tory leadership race. From October we will be crossing into a different economic and political landscape. The winner of this contest may aspire to introduce a boosterish autumn budget, containing all their super-duper plans for tax cuts and reforms of regulation. Forget all that: by October they will find themselves operating in an emergency environment and facing demands to provide thousands more in aid to each household.

The rescue bill for the government in the next six months could be anywhere between £30 billion and £50 billion, perhaps more if individual industries vital to national supply chains have to be bailed out or even nationalised. All with money that will have to be borrowed.

It suits neither campaign to acknowledge this terrible truth but they should see it in simple terms of national duty. As Martin Lewis has suggested, the two campaigns should meet, immediately, in rolling session. They could agree to co-operate on joint statements pointing to further help and a national programme of energy efficiency.

The government is going to be compelled by public fury to borrow billions more to help with bills in a few months’ time. So move now, ordering reduced use of energy and encouraging insulation, with the aim of lessening the costly increases and the size of the public bailout that will be needed.

Right now, there is no such plan. Why? The outgoing prime minister did too little to grip the crisis. Now this crisis will grip his successor.

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Energy crisis could become a poll tax moment - by Iain Martin for the Times - 03.08.22
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