Looney’s embarrassment was understandable. High earners like him (and, indeed, high earners who make significantly less) obviously don’t need government help paying their energy bills this winter. There was no good economic reason for Sunak to add a universally applicable £400 component to a package which was otherwise rightly focused on vulnerable households, ie those most affected by higher bills. This point, surprisingly, seems to have been missed by Sir Keir Starmer. The Labor leader has chosen to back the most ill-advised form of support this winter – a plan to freeze the price of energy for all consumers, rich and poor, at its current level for six months. The idea is popular, we are told, because three out of four Tory voters support it. In this sense, it may represent smart policy. the next prime minister will be under pressure to adopt parts of the proposal, including a windfall tax hike on North Sea oil and gas producers. But the economics of freezing energy prices for all households, as opposed to just those least able to afford higher prices, doesn’t make sense. Starmer’s plan has the virtue of simplicity, it could be argued – and, yes, the plan comes at a cost if one accepts the £7bn fiddle resulting from temporarily reduced inflation-related payments on the public debt. But a program costing £30 billion over six months becomes very expensive if it has to be repeated for as long as wholesale prices remain high – a time frame that is not currently known. If the Looney household and others didn’t need Sunak’s £400 rebate, they certainly don’t require the average £1,000 savings that Labour’s proposal would deliver. More specifically, artificially holding down prices for everyone undermines the incentive of wealthier households to reduce energy consumption, an imperative that must be front and center in any national emergency response plan. Starmer also talks the language of more insulation in homes, but artificially undervaluing a scarce resource doesn’t encourage consumers to lower their boiler settings in the short term, use tumble dryers less, etc. “Suppressing the price signal will only increase the likelihood that we will run out of energy this winter,” says independent energy analyst Peter Atherton. Exactly right. One can argue all day about how to define a high-earning household that does not need support from the public purse, but a means-tested approach of some form still seems the best way forward. It would be fairer, more financially sustainable in the long run and more likely to change behaviour. Labour’s plan has gone awry. support must be targeted.
Heathrow seems to have redefined success
The way Heathrow chief executive John Holland-Kaye puts it, imposing a cap on the number of flights at the airport was an absolute triumph. Limiting the number of departing passengers to 100,000 a day from July, it has fewer last-minute flight cancellations, better take-off punctuality and shorter baggage waits, the airport boasted just last week. So, having bought time to rebuild and refocus, is Heathrow now able to resume a normal schedule in time for the next spike in demand that will arrive with the October half-term holidays? Basically no. The airport is extending the cap until October 29 for the same reason: that it needs to support “more reliable and resilient passenger journeys”. An extension is probably reasonable if Heathrow – or the groundhandling companies it usually blames during episodes of chaos – do not yet have the necessary resources. But let’s not lose sight of the bigger picture. The jump to capping passenger numbers was a spectacular management failure that stemmed from underestimating the speed of demand recovery. Taking even more time to solve the problem is not success.
