Labour Now Talking Cap Should Have Used a Cap Not a Frozen Cube


Labour spin-doctors wish to point out that they said in September 2013 that they would set up a body with “the power and remit to force energy companies to cut their prices when there is evidence of overcharging, for example when wholesale costs fall and the market fails to respond.” This was in the small print of a briefing note, however. 

The same note also stated: “we will put a stop to unfair price rises by freezing energy bills up to January 2017 for people coping with a cost of living crisis.” And this is what Ed said to the voters rather than a handful of journalists who read their press releases:

“The next Labour government will freeze gas and electricity prices until the start of 2017.”

Their Party Political Broadcast could not be clearer:

“frozen – that’s right – frozen”

And now they are obfuscating, as Guido covered earlier:

All this shows the Labour Party’s complete ignorance as to how the energy markets work. What they should have called for is a “cap”, not a “freeze”. The energy companies would then buy insurance in the form of call options – a cost that would have to be passed on to those customers who wanted a cap. A “freeze” is different, the energy companies have to hedge by buying energy futures or forwards locking in the price. If they wanted a “cap” why did they call for a “freeze”?


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