Well, this is awkward. If you are British you might remember that energy plan that Ed Miliband had before the election. The plan for a price freeze and a market reset? The one that attracted considerable derision from the Tories and some criticism from pro-market commentators such as, er, me? That’s it, yes.
David Cameron described Miliband’s ideas in the following terms in October 2013:
“You want to live in some sort of Marxist universe where you control these things but you need a basic lesson in economics.”
Today the Competition and Markets Authority has just announced that it is recommending something very similar to combat overcharging of customers. They are calling for a price cap (cuddlier terminology than Miliband’s freeze) and then the introduction of new measures to increase competition.
The government, which lambasted Miliband and talked as though Labour’s scheme would lead to a re-run of the Russian Revolution, is “studying the report” and it is highly unlikely it will reject such, on the face of it, pro-consumer sounding recommendations.
If you were Ed Miliband you might feel a little aggrieved on hearing the news of this development. After all, his plan has gone from crazy to sensible received wisdom in exactly two months. Politics is a tough old game.
However, my objection to this latest plan (as it was to Miliband’s proposals on energy and banking) is that the emphasis on a price freeze is anti-market grandstanding. What will really increase competition is trust-busting or breaking up established players to attack cartelisation and benefit the consumer. On banking, Miliband’s team when he was leader seemed to have no idea how that might be achieved. In the age of fintech (financial technology which is disrupting traditional banking where the old institutions have patched together IT systems that are often not fit for purpose) Miliband’s proposed efforts were insufficient. Selling off branches in state-owned banks that no-one wants was never going to revolutionise banking. On energy too, the concern was that the primary point of the policy was the meddling price cap and after it was introduced it would be extended, with the more competition getting delayed for ever in the Whitehall machine.
This CMA proposal appears at first glance to replicate some of the flaws in the Miliband scheme. No major break-up of large players is envisaged. Lots of fiddly programmes, and talk of smart meters, to get consumers to move between existing providers, is what is prescribed.
Still, it looks as though the Tories will preside over the implementation of Ed Miliband’s energy policy.