TBH, I don’t think the downsides would necessarily be that great but as Harford observes the benefits certainly wouldn’t be very substantial either
What exactly do you think is wrong with a freeze?
Let’s start by acknowledging that this is economically a sideshow. If he is lucky, Mr Miliband’s 20-month cap (why 20 months?) will delay a price rise of 10 per cent or so. Energy spending comprises 5 per cent of the basket of goods used to calculate the consumer price index. So Mr Miliband will, on an optimistic view, postpone (not prevent) a 0.5 per cent rise in CPI. That will help some people but is trivial compared with what he might do with the tax or benefit system.
But it’s still something – so what’s the downside?
The first downside is that it makes UK energy policy look capricious, confrontational and juvenile. That matters because this country urgently needs new electricity generating capacity. If suppliers don’t expect to get the revenue they need to cover their costs, they won’t invest. It’s alarmist to suggest that Mr Miliband will simply scare them away and the lights will go out, but it’s reasonable to expect that they will need more convincing in the wake of his little pep talk at the Labour party conference, which can be summarised simply as: “Your customers vote and you don’t, and I’ll never forget that.” He has achieved the remarkable feat of damaging the country before becoming prime minister; most party leaders wait until they win an election before they start screwing it up.
Mr Miliband isn’t really very scary. Is that the only problem?
He is also ignoring climate change. Reducing greenhouse gas emissions means conserving energy, and generating it using nuclear power and renewables, both of which are probably more uncertain and more expensive propositions than oil, gas and coal. Because of this, prices are rising as a matter of policy – policy that began under the last Labour government, in which Mr Miliband was, I seem to recall, the energy secretary.