Starmer’s secret plan for energy prices is terrifying
By Paul Homewood
When Sir Keir Starmer pulled back from Labour’s commitment to spend £28 billion per year on green projects, it was no surprise. The number never made sense given the other pressures on public spending. Unless Labour intended to increase either income tax & National Insurance or VAT by a large amount – in the region of raising VAT’s standard rate from 20 per cent to 24 per cent – it would have been extremely difficult to afford.
But there is a catch. There is no indication that Labour intends to step back from its Net Zero commitments. So where is the money going to come from? There is no magic money tree and the costs of achieving Net Zero targets appear to be rising rapidly. Even the £28 billion figure would have been little more than a down payment on the long-term costs. It is about 1 per cent of GDP which must have sounded like a convenient round number. However, Michael Kelly, a distinguished engineer who examined the costs of reaching NetZero, concluded that the total cost is likely to exceed 4 per cent of GDP up to 2050.
If not through taxes like VAT, then how does Labour intend to pay for this? Room for borrowing is tightly constrained by the party’s fiscal rules, which leaves only one likely option: stealth taxes on you and I, on all households and businesses in the UK. These may take many forms – levies on electricity and gas prices, mandatory requirements to buy EVs and heat pumps, constraints on what we can eat or consume, and so on. Our daily life will be more expensive and inconvenient than it might have been, with limited or no incentives to use resources more efficiently or to improve our standard of living. For anyone of a certain age this is back to the dreary 1970s with vengeance.
Sadly, the impact of stealth taxes on daily life is only the beginning of the story. Most of the £28 billion was required to underpin the goal of decarbonising the electricity system by 2030. That is quite probably physically impossible but consider how this might play out. In 2022 the UK consumed an average of 4,060 kWh of electricity per person excluding use in the energy sector. Only 1,425 kWh of that total was used by households with the remainder being consumed by industry, commerce and services. £28 billion per year is equivalent to 10.2p per kWh for all electricity consumption, or 29.1p per kWh for domestic electricity consumption.
The cost of £28 billion per year on households would exactly double the current price cap of 29p per kWh for domestic customers. Since most people regard the current cost of electricity to be extremely high, imagine how household budgets would look if the price of electricity were doubled. Not much incentive to buy electric vehicles since they would be significantly more expensive to run – and with no prospect of a reduction in charging costs.
The situation would be arguably even worse if a levy were raised on all electricity consumption. The UK’s electricity prices for industry are among the highest in Europe at 12.1p per kWh for very large industrial consumers in 2023Q3 and 20.7p per kWh for large industrial consumers. Adding 84 per cent for very large consumers, or 49 per cent for large consumers to electricity costs would hardly improve the UK’s attractiveness to industrial investors. What would the economics of Tata Steel’s new electric arc furnaces in South Wales look like if electricity costs were nearly double their current level?
In any case, putting levies on the electricity prices paid by non-household customers is simply an indirect – and inefficient – way of taxing households because the costs would have to be passed on. The inefficiency arises because businesses may close down or the numbers of teachers and nurses may be reduced in order to meet the higher operating costs.
There is no escaping Labour’s dilemma. The party’s Net Zero goals are inordinately expensive. Abandoning the £28 billion public spending target while maintaining the goals just makes everything worse for households and businesses. Sir Keir should now change the goals – and then decide how to pay for them.
Professor Gordon Hughes is a retired Professor of Economics at the University of Edinburgh, and a former senior adviser on energy and environmental policy at the World Bank
https://www.telegraph.co.uk/news/2024/02/22/labour-energy-prices-tax-rise-green-levy-net-zero/
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NOT A LOT OF PEOPLE KNOW THAT 
Grid reconstruction alone would cost over 70 years of Labour’s scrapped £28 billion. Not that we have either the engineers or the materials to do it. Miliband wants to decarbonise electricity by 2030, which is about as realistic as everyone moving to Mars by 2030. The whole thing is going to come crashing down at some stage.
jeremy 23846 : “The whole thing is going to come crashing down at some stage.”
That’s the whole purpose of CAGW and its “solution”, Net Zero.
Many of us are doing our best to point out the insanity of net zero and the effect that trying to implement net zero would have on the UK and on its citizens. It is an uphill task, with so many committed idiots out there in government, local government, the civil service and NGOs.
Phillip, I tend to the belief that those do committed are equally compensated for their commitment. May I offer one, Lord Deben as a starter?
A crumb of comfort is that we hugely outnumber the committed idiots when it comes to time for regime change.
They would increase the price of gas. Thus encouraging use of electricity at the same time as paying for their madness.
“You will own nothing, and be happy”
Correct on the first part (we won’t be able to afford anything), but most definitely NOT on the second…
It is an uphill task,
A clear, concise and consistent non-believers’ voice in the medjia would be a good start, as would forcing the mainstream medjia (e.g. BBC) to broadcast the views of non-believers to balance the views of believers.
The lack of proof re dangerous AGW and the estimated cost of net-zero must surely be enough to undermine the believers’ cause.
The belief or non belief in man made climate change isn’t the biggest problem here as someone who was involved in an energy policy working group in the Green party.
A bigger question is where the hell have all the investigative journalists gone?
We have a government policies (electrification of space heating & electric vehicles) that no rational person can believable claim won’t increase electricity demand and the law (Electricity Act 1989 Section 3A) explicitly requires the relevant secretary of state to secure that all reasonable demands for electricity are met and to consider future consumers.
There is no corresponding plan to adequately increase electricity generation to meet our equivalent instantaneous natural gas & heating oil demand https://www.birmingham.ac.uk/news-archive/2018/gas-consumption-during-the-beast-from-the-east-how-the-local-gas-system-kept-us-warm
Then God know what will happen during an unusually cold winter e.g 1947 or 1963.
I think we needs to challenge the government’s current plan regarding net zero under the climate change act.
As there are some serious questions that need to be answered:
regressive to people on low incomes compared to the alternatives? Why are subsidise linked to generation i.e. when there is wind or sun when helping with the capital cost would be a more rational approach for the tax payer.
the best way to change the net zero narrative by highlighting how much it sounds like the snake oil salesman’s solutions see carbon taxes (as a front to bring in a universal basic income) & renewables as we don’t know what the weather will be like in the future with any reasonable certainty but we do know humanity is more vulnerable to extreme weather/climate events than what we can reasonably mitigate with our engineering capability as there is no evidence changing Co2 levels at this point will reduce the risk of extreme weather and we are actually make ourself more vulnerable if we take the climate scientist prediction in good faith & they prove to be correct on a warming planet this would also mean less wind so investing so heavily in wind power makes no sense considering the alternatives like nuclear fission are better way to produce energy from just a logistical view point just like with addressing droughts more advanced water recycling from waste water (see Singapore) and the ability to use desalination, the use on an island nation of salt water for toilets (see Hong Kong) as well as increased water storage make sense. The is also the problem that the winter could actually get colder.
So the most logical response is to call in the engineers instead of screaming we are all going to die – think how simple putting underground storage tanks & adequate drainage in places where flash fooding is a predictable hazard.
Nett Zero by 2030 or Not Zero, that is the question.
Oh how the Bard of Stratford would have loved to be alive today:
A Tale of Two Economies – one run on coal, gas, nuclear, hydro, solar, wind, the other on solar and wind, one successfully maintaining it’s People, the other reduced to Fourth World status with no industrial ability.
The Comedy of Errors – a review of the Climate Change Committee factual reports and costing’s.
The Tempest – oh no, the wind it doth blow too hard, the turbines that power the lights must be turned off, oh no, no power, no lights
A Midsummer Night’s Dream – Greta meets Kier and together they plan to save the World, only to wake up and find that unless the wicked people using Coal to manufacture goods desperately wanted by industrial nations are stopped, all they have achieved is the destruction of their own economies for no gain.
The Winter’s Tale – errr, you know we’ve been banging on about Global Warming and a Climate Crisis – the temperature is going down and it looks like John Snow was right, Winters coming. It must be down to Climate Change, quick declare a Climate Crisis, we have to take immediate action to get temperatures up a minimum of 3degrees to save ourselves, we only have 72hours to save the planet…………..new slogan “Cold weather kills more people than hot weather, save people, burn coal or gas”.
The reality is Starmer has no plan. He gave the responsibility to Ed Miliband, whose plan was shown to be unworkable and unaffordable, and rejected by Rachel Reeves. There is no new plan.
Events will soon start forcing hands. All the attempts to offer backdoor subsidy topups to increased CFD prices and looming capacity closures will make energy policy a minefield.
<i>The reality is Starmer has no plan.</i>
There are plenty of “aspirations” floating around their website. Double this, triple that bring bills down permanently. None of it exactly big with details.
Whatever they go with I can promise two things, bills are not coming down and “de-carbonisation” of supply will never happen anytime soon.
What we need is our political Great and Good to be interviewed on live TV by Lord Sugar’s ‘The Apprentice’ recruitment team!
If you have a couple of minutes this is comedy gold but be warned, it’s also excruciatingly embarrassing.
Personal experience, green business models, costings, viability and more would be scrutinised by experts on a TV reality show more in one day than they have been by the CCC, Commons, Lords or UK media in the 16 years since the 2008 Climate Change Act was passed.
Every would-be ‘Secretary of State for Energy’ would be surgically dismantled and pilloried to within an inch of the lives, before being sent on their way in humiliating fashion. If this ever happened it would literally finish careers.
It really is time to show up Net Zero as THE most stupid, impossible and downright implausible policy in living memory.
Excellent post and that process should be adopted to interview our present and prospective politicians, money well worth spent. The trouble, could be there would be no suitable candidates so no govt. nor parliament – what then? Perhaps relief all round?
which leaves only one likely option: stealth taxes
They can print the money to pay for it.
Hello, inflation.
Kneeler Flip Flop ‘A fresh U-turn every week’ Starmer will run headlong into the buffers of reality should he become PM. Very few Labour MPs have any government experience so have no idea of the change that takes place when you actually have to face facts as opposed to rant from the opposition benches. The LimpDumbs found that their infantile student union politics did not survive reality when to their shock they found themselves part of a Liberal government with Call Me Dave’s Tories. None of them ever expected to be part of a government in their lifetimes so could propose all thoughts of things in the knowledge that they would be in a position to act. While Reeves may be a plagiarist she does seem to be part way competent and can see that a huge spending splurge would bring on a financial crisis very quickly.
I believe Labour’s ‘ get out of jail card ‘ no matter how incompetent they are will be to blame the present Government for everything that is unpalatable. Unfortunately, due to the appalling historic record of the Conservatives it will be all too easy for the public to swallow.