Who is paying the price for Labour's caution on energy?

Age UK has found four-in-five pensioners living below or just above the poverty line will lose their winter fuel payment as a result of Rachel Reeves' decision to limit payment to those on pension credit, while research by the Resolution Foundation has found that nearly 7.7 million (37 per cent of) households will be at risk of “fuel stress” this winter and will struggle to heat their homes. It’s even more severe in single-parent households, the number jumping to 77 per cent.

Having started from the position of promising an energy revolution, with a proposed £28 billion a year investment on green energy projects like offshore wind farms and developing electric vehicles, Labour first muddied the waters, then it u-turned to promise just £15 billion a year, now it is penalising pensioners by making them choose between heating and eating, while all the noises coming from government implies that we will be lucky to see that amount committed to the plan.

The Politics Home points out that one of Labour's few unashamedly ‘retail’ promises in the Labour manifesto, that families’ average energy bills would be up to £300 lower by the end of the decade is now in jeopardy.

The website says the recent increase in the energy price cap – as well as the decision to remove universal entitlement of pensioners to winter fuel allowance – has put that pledge in the spotlight. And that, although Ed Miliband, the Energy Secretary, seeks to use the recent rise in wholesale gas prices to underscore the case for ending fossil fuel energy in the UK by 2030, thus freeing ourselves from a notoriously volatile market and ensuring that British families can benefit from reliably cheap renewable energy, there is no indication as to who is going to pick up the bill:

With many facing a winter of uncertainty, there are concerns that some decarbonising costs could be passed on to consumers too, who will then be expected to stump up even more money – at least in the short term. “The investment needed to get there will mean that in the interim there’s a risk of higher bills,” says Alex Belsham-Harris, head of energy consumer markets at Citizens Advice.

And if the short-term vagaries of the energy market are difficult, they are dwarfed by the challenge of moving the nation off gas boilers and onto clean alternatives like heat pumps. Lower-income households will inevitably find it a challenge to pay for any additional costs, however small, to decarbonise their homes. “What’s happened in the past is paying for net-zero policies through levies has actually made low-income households disproportionate sponsors of those policies when they’re not necessarily getting the benefits,” warns Copeland. “The government has to make it easier for the poorest to make this a just transition. If we don’t, the poorest will suffer most,” urges Lord Deben, former chair of the Climate Change Select Committee.

A No 10 source agrees that you cannot put the cost of the transition onto the taxpayer. “Our whole country, pretty much, is dependent on fossil fuels to heat their homes and we need to change that,” says a Labour MP, who explains that local authorities should be given powers, alongside third-sector partners, to offer green upgrades to households that can be paid in instalments to avoid upfront costs.

“You need to do it at scale because if you leave it to individual consumer choice you will end up with very high costs, either for the consumer or the state,” they add.

"We’re obviously going to have to mobilise a lot of public and private investment behind this if we’re going to be able to deliver it at scale and in a way that really delivers benefits for consumers, not just in security, but in their back pockets through bills too,” says Strathern. So far, just 250,000 out of 28 million households have had heat pumps installed, likely in part due to a costly installation process.

“There are ways of structuring the financing of this kind of thing that will keep the costs for consumers down,” maintains the Labour MP, but doesn’t explain what these might be. “It could only be done either through massive energy bill increases for consumers or through massive tax rises,” says Conservative peer Lord Hannan, adding, “neither of those is really a credible option.”

And the cost of installation isn’t the only issue. “Your costs don’t always reduce if you use a heat pump instead of a boiler – in fact they can increase,” says Copeland.

But the Labour MP counters: “They don’t have to be expensive to install, and they don’t have to be expensive to run, if you get the regulatory framework right, and that’s what the government needs to be doing.”

For pensioners the cost of decarbonising their home would simply not be worth the upfront costs. “If you haven’t got many years to live, you’re not going to have time to be able to reap the financial rewards of moving to a more energy efficient home and a lot of older people are in that position,” points out Caroline Abrahams, director of Age UK.

“It is an utterly unachievable project,” argues Hannan, who predicts the 2030 target will not be reached. “When we get to the expense of having to replace boilers and so on, I think attitudes will change very quickly. I wouldn’t be at all surprised if Ed Miliband is the first Cabinet minister to resign,” he says.

“This might seem like a foreign concept, but it’s because we have chosen not to embrace a strategic approach to decarbonising our energy system and that’s what we’re going to do,” insists the Labour MP.

The decisions that will be announced in tomorrow's budget and over the next few months will be crucial in determining whether this energy revolutionn can be achieved, or whether it will prove too expensive and too difficult for the government to commit too.