Coalition at war over green policy

Under severe pressure at Prime Minister’s Questions to respond to Labour’s pledge to freeze gas and electricity bills, Mr Cameron announced a review of competition within the energy market and promised he would “get to grips” with green regulations and charges on energy bills.

The review will include an assessment of the profits enjoyed by the energy companies – but will not reach its conclusions until late next year. Labour dismissed the move as a “panicked and totally inadequate” response to the issues facing billpayers.

More significantly, in a mark of the depth of division within the coalition, a senior Liberal Democrat source said that Conservatives had not actually put forward any “properly worked-up policies” within Government on green taxes, and said the PM was “making policy up on the hoof”.

“Everybody knows the Tories are getting cold feet on the environment,” said the source. “The Tories have put no properly worked-up policies in front of us.

“But we will not allow a panicky U-turn during PMQs to dictate Government policy. The way to provide stable fuel bills now and in the future is not to make policy up on the hoof.”

Mr Cameron’s intervention came after former Prime Minister Sir John Major called on the Government to impose a windfall tax on the profits of the largest energy companies.

Challenged on Sir John’s remarks by Labour leader Ed Miliband, Mr Cameron said: “I want more companies, I want better regulation, I want better deals for consumers.

“But yes, we also need to roll back the green charges that he put in place as energy secretary.”

Green levies make up nine per cent – £112 – of the average fuel bill. However, much of the money goes towards helping people in fuel poverty with their insulation and on supporting key new green energy industries such as offshore wind.

Labour said that £67 of the £112 levies were accounted for by measures introduced by the Coalition since 2010.

The Prime Minister’s determination to cut these charges back puts him on a collision course with Lib Dem Energy Secretary Ed Davey, who earlier this month said it would be “silly” to cut green levies

The Lib Dem source said yesterday: “Liberal Democrats in Government will not allow the Tories to undermine our commitment to the environment; hurt the fuel-poor; or destroy our renewable energy industry.

“Of course, we will look at the specific details of what the Tories propose. We will discuss the means, but we are not prepared to compromise on the ends.”

Downing Street said an annual review of competition in the energy sector will be conducted by regulator Ofgem, the Office of Fair Trading and the new Competition and Markets Authority. Details will be set out by Mr Davey next week in his annual energy statement to the Commons.

The first review is expected to begin within weeks and report next year, and will look at issues ranging from prices and profit levels to barriers to new entrants in the market, as well as how companies engage with customers, said the Prime Minister’s official spokesman.

A Number 10 source said the Prime Minister’s ambition to “roll back” green levies had been discussed with Liberal Democrats over recent weeks, and details will be released in Chancellor George Osborne’s Autumn Statement on December 4.