Energy prices: how to keep the United Kingdom competitive

The government must ensure that the UK can earn its living in today's competitive world. Energy prices should be high on the agenda.

From petrol pumps to production plants; energy affects us all.
John Redwood MP
On 8 August 2011 11:41

To me the biggest single political issue that angers and worries people is energy prices.

Every time you go to the pump to fill your car, every time the Gas and Electricity company sends you a statement or quarterly bill, you get a nasty shock. Super greens may tell us to wear thicker woollies, or to get on a bike but for many busy families there is no option but to take the car to work,  to use the boiler for hot water and central heating and the cooker for daily household chores.

Paying the bills leaves many short of cash for other items. It is an important part of the squeeze on spending we see in the shops.

The impact on industry is at least as bad. If you make cement, fire iron and steel, bake tiles and ceramics, run an extensive automated plant, produce chemicals, forge parts, manufacture glass and a host of other manufacturing processes, you need to use a lot of power.

Of course leading firms work away at less fuel intensive processes. They find ways to cut kiln times, ways to insulate and to reuse waste heat; they seek out methods which cut their power bills as much as possible. They would do all that even if our energy prices were lower.

The problem is that EU green and renewable policies, and carbon tax policies, do not apply to competitor companies in places like China, Korea and India. The EU may succeed in cutting fuel use here, but at the expense of exporting manufacturing jobs elsewhere. The fuel still gets burned, but not in our part of the world. More employment and value added has been lost and goods may be produced with less fuel efficient processes as a result.

I am glad the government wants to encourage more manufacturing in Britain. It is depressing in our shops to see just how many things we once made here are imported from emerging economies. Tempting companies and entrepreneurs back, or persuading new ones here to challenge the new masters of industrial output will require amongst other things a more benign energy policy.

More than ten years were lost recently by a government which would not make up its mind and define an energy policy which works.

This government needs to get on with it. We are told they are trying to find a way of allowing cheaper energy for manufacturing. Why not look for cheaper energy for all? Politicians rightly worry about fuel poverty but wouldn’t it be better in our current situation to solve that problem with cheaper energy, rather than offering more benefits taxpayers can scarce afford?

The EU wants us to scrap all our old coal stations; domestic pressures will lead to the closure of many of our older nuclear stations. That means there is a lot of  capacity to replace. Combined cycle gas is the cheapest and quickest way of doing that. Isn’t it time to get on with it?

Some, I am told, is now going to be commissioned. Wouldn’t that send a message that the UK is open for business? Would it not also reassure a little the elderly and those on low incomes who now dread the arrival of the  fuel bill?

The UK needs to earn its living in an increasingly competitive world. Let carbon prices, high renewable obligations and all the rest be global agreements, not pioneering increases in UK costs that simply transfer the jobs elsewhere.

The Rt Hon John Redwood MP is the Member of UK Parliament for Wokingham and the Chairman of the Conservative Economic Affairs Committee. His articles are cross-posted on his blog by agreement.

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