Bills

ED MILLIBAND's big new idea is on energy bills. While he chooses to forget that these doubled under Labour he is right that people really struggle with them.

His proposal, though, that we can ease the problem by the foraging arm of government imposing a 20 month price freeze on energy companies is complete madness.

This would see these businesses raising prices prior to the freeze and likewise after it.

It would mean that should wholesale energy prices spike during the freeze period then either Ed would have to break his promise or watch energy companies lay off workers rather than make a loss.

The message that such intervention sends to others (especially those we are trying to encourage into the fray to increase competition) would be that this is a market laden with political risk.

So what should we do?

Firstly, we need to examine the profits made by these energy companies – they generally claim this is just 5% of the average bill.

Energy bills in other European countries are typically higher than our own so who knows perhaps they have a point – but let's find out. The PM's announcement of a 'competition test' is a real step forward. Secondly, we must press on with simplifying tariffs and making it easier for people to switch suppliers and thirdly we need to review green subsidies.

These fall into two categories – generation subsidies (e.g. wind farms) and social subsidies (e.g. lowering fuel bills for poorer households).

We need now to urgently review how much of this subsidy consumers should be expected to swallow.

My instinct is to cut some green subsidies and transfer the social subsidies into general taxation.

Reducing carbon is vitally important and we will meet our commitments – but the solutions we employ cannot come at any price.