PM announces plans for energy price cap in housing filled speech to conference

energy-switching-fuel povertyPrime Minister Theresa May has renewed a commitment to introduce a cap on energy prices for customers on standard variable tariffs.

During her eventful speech to the Tory Party Conference yesterday, Ms May once again pledged to limit the amount people pay for their energy through legislation although details on how this would be done have not yet been provided.

Included in the Conservative election manifesto, but left out of June’s queen’s Speech, it is believed the plans will save an extra 12 million consumers an average of £100 a year.

Set and reviewed regularly by energy regulator Ofgem, the price cap will be temporary and may not come into effect until the winter of 2018-19.

The full details will be published in a draft Parliamentary bill next week.

Ofgem said its top priority was to protect consumers and it would co-operate with the government.

“We share the government’s concern that the market is not working for all consumers, especially the vulnerable, and will work with the government on their plans announced today to better protect consumers on poor value deals,” an Ofgem spokesperson said.

Welcoming the news, Kate Morrison, energy policy manager at Citizens Advice Scotland’s Consumers Futures Unit, said: “It’s no great surprise that the UK government has felt the need to intervene in the energy market. Trust in the market is low and prices have continued to rise with a lack of transparency.

“This is a particular issue for Scottish consumers, given our cold wet climate and high fuel poverty rates. We would welcome any action that makes bills more affordable.”

However GMB, the union for energy and gas workers, has responded to the price cap commitment by calling for Ofgem to be abolished and its regulatory functions taken over by government itself.

Former energy regulator Stephen Littlechild said in July that while Ofgem can propose a tariff, energy suppliers do not have to accept it.

Justin Bowden, GMB national secretary, said: “Ofgem has been a toothless wonder that passed its use by date years ago, it is not fit for purpose and now is the time for it to be replaced.

“GMB has always ridiculed the very idea of a competitive market in a natural monopoly because it is a contradiction in terms that we all pay for through our energy bills.

“Ofgem should be abolished and all its regulatory functions taken over by the government itself, making its regulatory role subject to scrutiny and accountable to parliament with the powers to cap prices if deemed necessary part of the forthcoming legislation.

“This would form the basis of an energy policy that took the real decisions needed to keep the lights on and ensure the decarbonisation of the sector, whilst guaranteeing the resources needed to generate jobs and to pay for the vital infrastructure needed to maintain our power networks.

“Any cap must differentiate between profiteering and these fundamental necessities so government should also have powers to limit profits and, where necessary, to finance and run power stations.”

Elsewhere in the speech, the Prime Minister announced a further £2 billion for affordable housing in England, with a hint that social rented units could be built using the money subject to bids from housing associations and councils.

David Orr, chief executive at the National Housing Federation, described the announcement as “a watershed moment for the nation”.

He said: “In the aftermath of the tragic fire at Grenfell Tower, the prime minister said that we as a nation have not paid enough attention to social housing.

“Today, she is right to make a bold break with the past and commit to building the homes we need most – genuinely affordable homes for those on the lowest incomes.

“The additional £2bn will make a real difference to those let down by a broken housing market. Building homes for social rent will make work pay and help bring down the housing benefit bill in the long run by moving people out of costly private lets.

“Housing associations have been unequivocal about their ambition to deliver the homes the nation needs, be that homes to rent or homes to buy.

“Improved access to finance and land will see housing associations able to unleash their full potential, building on the 48,000 homes they started last year.

“Building with housing associations represents excellent value for taxpayer money; for every £1 government puts in, housing associations raise a further £6. We are ready to work with the government to deliver a new generation of genuinely affordable, high quality homes for rent.”

Under the proposals, increases to social housing rents will be limited to the Consumer Price Index (CPI) plus 1% for five years from 2020.

Chartered Institute of Housing chief executive, Terrie Alafat CBE, said: “This new rent settlement is good news for social housing – it provides the stability and certainty landlords need to build more desperately-needed new homes and to invest in their existing homes and services for tenants. We need to make sure that rents are genuinely affordable for people on lower incomes. In our recent Building Bridges report we proposed that rents should not take more than a third of net earnings for people on below average income, and should not normally see working households needing to claim housing benefit.”

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