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Industry criticises Tory pledge to cap energy bills

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24/04/2017
The Conservative's pledge to cap energy prices has been described as a ‘backward step’ that could reduce competition in the market.

Work and pensions secretary Damian Green told ITV a price cap would be included in the Tory party manifesto, which is due to published next month.

“Some people feel the energy companies have taken advantage of them,” he said.

However, the move has been widely criticised.

Comparison site Gocompare.com Energy said it could stop people switching for a better deal.

Energy spokesperson, Tom Lewis, said: “A price cap is a backward step, at a time when competition and switching in the energy market are on the rise. Competition and regulator-led reviews of the industry in recent years have consistently pointed to greater consumer engagement and switching as being a force for good and the most effective strategy for households battling to keep their energy bills down.

“As a result, the switching message is getting through to millions of households. We need to maintain that momentum, encourage more households to take control of their energy bills and carry on switching.”

He said a price cap could result in some people getting a slightly better deal in the short-term, but it could also reduce overall competition in the market in the long-term and increase inertia among consumers.

“A price cap would pull the rug from under the switching revolution and cast the market back more than a decade,” he said.

It is estimated that the Tory manifesto price cap pledge could save customers up to £100 a year on their energy bill, but households could save as much £300 a year by switching, according to Gocompare.

“The reality is that a price cap would encourage customers to sit back and stick with their existing provider, rather than actively engage with their finances and sniff out bigger savings elsewhere,” said Lewis.

Daniel Mahoney, head of economic research at the Centre for Policy Studies, said: “Theresa May is, quite rightly, seeking to reduce energy bills for consumers. But the claim that an energy price cap will save households £100 a year is by no means a guarantee.

“In fact, an intervention of this kind could be detrimental to competition in the market, meaning that this reform could end up doing more harm than good.”

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