Our cost-of-living crisis has a green solution
Ben Lake MP writes for the Sunday Times
This article appeared in the Sunday Times, 23 January 2022
As we face a difficult spring of rising energy bills for households and businesses, there are ominous signs that we are in fact at the beginning of a long-term cost-of-living crisis. The solution must be to ignore the false link between the energy crisis and net-zero, and instead work towards green solutions for the energy supply emergency, stagnating living wages and high inflation must be our immediate priority.
Firstly, like many others, I have found it disturbing that the UK Government has done little to counter misplaced rhetoric linking our net-zero commitments to the ongoing energy crisis. Such claims, denounced by the International Energy Agency, ignore the fact that 87 per cent of our price cap increase are due to increased gas prices with the remainder coming from supplier failure. Put simply, the green transition is not the cause of rising energy bills.
With bills due to skyrocket from April, the Government must immediately consider the merits of cutting VAT on energy and directly funding existing policy levies. Most importantly, all Governments need to expand targeted support programmes such as the winter fuel support scheme in Wales and reconsider upcoming tax hikes.
Yet while these interventions would help ease the pain of the crisis, unfortunately they would not stop bills rising or address the wider cost-of-living crisis. This because the latter is a confluence of factors, including high inflation, stagnant wages and the long-standing productivity challenge within the UK economy.
Firstly, the wages we earn simply are not going as far they used to as UK inflation has risen to 5.4 per cent, the highest level in almost 30 years. Worse and contrary to the rhetoric of the Prime Minister, average wages are not keeping up with inflation, meaning declining real wages for UK households.
This is linked to the UK’s longstanding low productivity crisis which means our economy lags behind in productivity our G7 competitors puzzle by on average 13 per cent. This not only hinders our economy competitiveness but as productivity as the critical economic driver behind wage increases, has contributed to a long-term stagnation in household incomes.
Thankfully, we have at least two rhetorical commitments from the Government which if implemented could address this cascade of problems: levelling up and our net-zero agenda.
One clear lesson from the energy crisis is our continued vulnerability to changes in hydrocarbon fuel prices, fuels which the climate crisis require us to wean ourselves off. We can today address this by reducing energy demand - and therefore fuel bills - in the first place by improving household heating efficiency.
This is something Plaid Cymru has long advocated and at the Autumn Budget I called on the Chancellor to make a £3.6 billion investment, in conjunction with the Welsh Government and the private sector, to improve home insulation following proposals made by Wales’ Future Generations Commissioner. This investment would stimulate employment and help end fuel poverty within the decade by delivering fuel bill savings of £418 on average for Welsh residents.
Moving from demand to supply, the crisis has also underlined the importance of securing our energy supply chains. Rather than importing energy from the Middle East or Russia, the green transition offers us the opportunity to invest in our domestic renewable resources and locate energy supply closer to home, if only we get the policy right.
The benefits of doing so were clearly demonstrated this week when the Scottish Government secured nearly £700 million of revenue from the leasing of Scotland’s seabed to windfarm developers via the devolved Scottish Crown Estate. Their noteworthy success underlines the importance of locally informed policy and adds impetus to Plaid Cymru’s campaign to devolve the Crown Estate to Wales so we can better localise revenues and improve our bargaining power with the private sector.
In sum, we face a long-term cost-of-living crisis that requires far-reaching and bold solutions. We have the rhetorical taglines in the form of ‘levelling up’ and the ‘net-zero agenda’, but now we urgently need Government to add real detail to these slogans to help our households and businesses in the coming difficult months.
Tory populists distracting from their Government’s errors by creating a false causation between rising costs and climate change action are creating a dangerous deception that helps no one and condemns everyone. A more truthful and constructive approach is to focus on greening the fundamentals of our economy to address the real challenges behind the cost-of-living crisis.