* TALKING POINT, ANDY MAYER
* RAIL STRIKE MISERY
* LIVE WITH(OUT) LITTLEWOOD
* iN THE MEDIA
* IEA DIGITAL
* CALLING ALL STUDENTS!

At the heart of the arms race between energy analysts to forecast the highest winter price cap is a simple truth: markets and competition deliver low prices, not state planning and price controls.

The UK’s current domestic prices policy, a quarterly cap, was introduced during last decade’s moral panic about small differences between most tariffs, and a handful of extreme cases. It doesn’t work, only delaying price rises, while destroying price discrimination, and redistributing who pays and when. It further distorts energy markets already weighed down by bad policy choices that increase the cost of decarbonisation and undermine security of supply.

The cost of bailing out the 28 retail companies the cap caused to fail has been added to everyone’s bills. The 29th has been uselessly nationalised, with the same executive team still in charge, and the cost added to taxes rather than bills. The Opposition's proposal ([link removed]) to introduce a genuine cap, at a cost of at least £29 billion every six months would amplify the problem ([link removed]) , ensuring further business failures, and that future taxpayers pay for heating energy executives' swimming pools ([link removed]) this winter.

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On the supply side, the old renewables incentive scheme pays gas power-driven wholesale prices to ageing wind farms with a carbon subsidy on top. Their newer rivals dodge ([link removed]) their own price-capping agreements that are relatively cheap, but only if we ignore the network improvements and back-up power required to support them.

Our nuclear alternative rests on a French energy company with rusting ([link removed]) technology and mothballed plants, currently suing ([link removed]) the French government for causing it to fail with their own price cap. We are required to import gas due to blocking domestic fracking, while imposing naïve Net Zero regulations ([link removed]) and windfall taxes on the North Sea.

As we note in the IEA publication, the Carbon Conundrum ([link removed]) , by Professor Philip Booth and Carlo Stagnaro, politicians' belief in their ability to pick winners and prices has distorted markets and made both energy and climate policy incoherent.

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The incoming administration needs to act quickly to address the consequences of rising prices for the most vulnerable, preferably through existing welfare ([link removed]) . They might consider cutting some taxes. They could knock 44p off ([link removed]) fuel duty and VAT, for example, to address the 44 per cent inflation in pump prices. This would save the driving majority £650. The old renewables policy could be reformed, and hidden carbon taxes like the UK ETS contained ([link removed]) .

They then need to get back to basics, restoring markets and competition to energy supply while ensuring carbon pricing is consistent and competitive ([link removed]) , not a source of further hardship.

Andy Mayer
IEA Chief Operating Office and Energy Analyst

RAIL STRIKE MISERY

With fresh transport strikes causing more travel chaos for rail, tube and bus passengers, IEA Editorial and Research Fellow Professor Len Shackleton spoke to Talk TV ([link removed]) and Times Radio about the unions' demands.

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Len noted that many of their demands are simply unrealistic. Unless the railways are modernised, the industry's productivity will not improve.

He said: "A lot of the disputes stretch back decades! The idea of rostering people at weekends is something that the railways have been struggling with for a hundred years now...We've got some very ancient issues here which are holding back productivity, which are holding back the development of the railways, which in principle ought to be gaining market share in a situation where it's become more and more difficult to drive." You can listen to highlights h ([link removed]) ere ([link removed]) .

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Writing for CapX ([link removed]) , Len discussed the discrepancies between the demands of the trade unions and economic reality. He posited that by undertaking direct action to pursue their demands, they are jeopardising the future of the sector.

Commenting on the outdated nature of the unions and their demands, Len asserted: “The unions themselves are museum pieces, with long histories and hoary grievances to match. Many of the non-pay issues they are concerned about long predate the now-largely-reversed privatisation which union leaders incessantly complain about.”

You can read Len's latest briefing paper, 'Summertime Blues: Unions, strikes and the law in 2022', here ([link removed]) .

LIVE WITH(OUT) LITTLEWOOD

On Wednesday, Alex Deane, political commentator and consultant, took the reins as guest presenter of Live with(out) Littlewood.

The panel discussed the ongoing Conservative leadership contest, Keir Starmer's proposed cap on energy bills, and whether the Overton window has shifted to the left.

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This week's guests were John Ashmore, Editor of CapX; Christian Calgie, Senior Reporter for Guido Fawkes; IEA Acting Director of Communications Emily Carver; and IEA Energy Analyst Andy Mayer.

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Discussing the impact of NIMBYism, Christian Calgie gave a passionate speech on the detrimental impact NIMBYism has had on a number of sectors – including housing and energy.

Christian exclaimed: "Let's also talk about NIMBYism, as the cause of almost every problem this country has faced for the last decade! Most power really lies with local residents who can block anything because they don't want to see a wind turbine and they want to look over an open field!"

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John Ashmore gave his view on why nuclear power has not gained sufficient traction in this country. John argued that it is largely due to stigma. In a humorous intervention, he said:

"I actually think that no one is more responsible for misleading the public on nuclear than Homer Simpson! Most of our impressions in pop culture about the nuclear industry are that it is one bald idiot away from meltdown! The reason that it's so expensive is actually because it is incredibly safe!"

The full episode can be watched here ([link removed]) .

iN THE MEDIA

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Communication breakdown... The Daily Mirror ([link removed]) reported this week that communities have lost out on £1billion, after the government slashed 5G mast rent costs for telecoms firms. Quoted in the article, IEA Academic and Research Director James Forder said:

“It is baffling that the Government seems determined to stop it operating, thereby depriving landowners of a fair return on their land, and slowing down 5G rollout at the same time.”

You can read James' report, 'Communication Breakdown: How reforming the Electronic Communications Code could speed up 5G rollout', here ([link removed]) .

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Hands off... Andy Mayer appeared on BBC Radio 4's World Tonight ([link removed]) programme to discuss the government's approach to tackling increasing energy prices. He was joined by Jonathan Portes, Professor of Economics at King's College, London.

Andy argued that the government has intervened too much in the energy market, with the price cap emblematic of their approach. He commented:

"If we decide to put price caps on energy, then why not other things as well? At which point the costs behind the current government scheme and Labour's proposal start escalating beyond the means of any government."

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Fantasy economics... IEA Head of Public Policy Matthew Lesh wrote for CapX ([link removed]) on Labour's proposed energy package and the history of ineffective price caps. From Ancient Rome to modern day Venezuela, Matthew chronicles the history of price controls.

He concluded: "The sad truth is that higher prices are necessary to send a signal that the underlying cost of products has increased. That does, unfortunately, mean that Britain is a poorer nation than it would have been. There are plenty of things we can do to try to arrest that slide and turn things around, but Soviet-style price controls belong in the dustbin of history."

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Online censorship bill... Matthew also appeared on GB News ([link removed]) to give his thoughts on the government's decision to delay the Online Safety Bill - in particular, the threat it poses to free speech.

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To graft or not to graft... Len Shackleton appeared on LBC ([link removed]) to discuss Liz Truss' leaked comments about British productivity with Nick Ferrari.

He stated: "There are 32 million people in the workforce and to pretend that they're all lazy is nonsense. But there is an element that Liz Truss did draw attention to. If you look at recent stories, we've been looking at stuff about 'quiet quitting', where people are doing the bare minimum required!"

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Cut and save... Discussing high levels of inflation on GB News ([link removed]) , Andy Mayer outlined measures that the government could take to save consumers money during the cost of living squeeze.

Andy argued: 'They could cut 44p from pump prices tomorrow...and remove VAT from fuel duty. That would save households about £650 until the end of the financial year.'
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As an educational charity, the work we do is entirely funded by donations. If you are able to help, please click here ([link removed]) or get in touch with our Development Director Angela Harbutt at [email protected] (mailto:[email protected]?body=Dear%20Angela%2C) . We thank you for your continued support.
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IEA DIGITAL

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The free market case for Liz Truss... The Conservative leadership race has renewed debates about the philosophical direction of the Party. In this video, Greg Smith, Conservative MP for Buckingham, spoke to IEA Senior Policy Advisor Sam Collins, to give the free market case for Liz Truss. Watch here ([link removed]) .

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The free market case for Rishi Sunak... Sam also spoke to Mark Harper, MP for the Forest of Dean, to discuss the free market case for Rishi Sunak. Mark characterised Sunak as the 'change candidate' and claimed that he is the most likely to win the next general election. Watch here ([link removed]) .

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IEA Podcast... In this episode of the IEA Podcast, Matthew Lesh spoke to Sir Dieter Helm, Professor of Economic Policy at the University of Oxford. They discuss the energy market, from the way it operates to the current high price of energy, and answer a variety of commonly asked questions. Listen here ([link removed]) .

CALLING ALL STUDENTS!

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The IEA's Oxbridge Training Day is fast approaching. The event will be held at the IEA office in Westminster and will take place on 21 September 2022 from 1.30–4pm. The event is free to attend and participants may join virtually or in-person. For more details on the event, and how to attend, click here ([link removed]) .

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The November Teacher Seminar is also being hosted at the IEA office. The event will include presentations from IEA researchers on issues related to the academic syllabus. The focus will be on the history of economic thought, whether forecasting makes sense, and the history of the government debt crisis.

The event will take place on 2 November 2022 from 10am–3.30pm. You can find more information on how to sign up here ([link removed]) .

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