IEA - Labours price cap will make the energy crisis worse

From: Think Tanks
Published: Tue Aug 16 2022

Andy Mayer, energy analyst at free market think tank the Institute of Economic Affairs commented on Labour's plan to freeze the energy price cap by expanding the windfall tax imposed on oil and gas companies.

High UK energy prices are caused by a global shortage of gas and domestic energy policies.

Labour's proposal to punish companies for investing in the North Sea and continue a ban on fracking will extend the supply crisis. It will leave us more exposed to expensive imports, unable to help Europe reduce its reliance on Russia, and with lower tax returns from drilling.

It does nothing to address the windfall profits arising from Labour's old renewables policy, with most wind farms benefitting from high gas prices and a subsidy, at our expense.

It destroys the price signal, incentivising higher domestic energy use, rather than investing in insulation and lower use.

It benefits those that can afford higher prices, rather than giving help where it is needed through welfare or social tariffs.

It will not help businesses by undermining UK manufacturing. It will impede energy market competition ensuring higher costs. This will inevitably mean higher bills or taxes for far longer than letting markets work.

Labour repeats errors made during the last energy crisis in the 1970s, economic mismanagement through make believe' price controls, that left the UK seeking a bailout from the IMF.

Notes to editors

IEA spokespeople are available for interview and further comment.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems, and it seeks to provide analysis in order to improve the public understanding of economics.

Company: Think Tanks

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