David Cameron's Double Whammy - The Government's Failure on Energy Bills Is Hitting Britain's Households

09/08/2013 08:29 BST | Updated 08/10/2013 10:12 BST

This week we learnt the full scale of the cost of living crisis unfolding in Britain. For 36 of the 37 months that David Cameron has been in Downing Street, real wages have fallen. And at the same time as people are seeing their incomes squeezed, the cost of living has also increased sharply. So things like getting to work and the weekly shop now cost much more than they once did. Falling wages and rising prices. David Cameron's double whammy.

When households are asked what their number one financial worry is, their answer is resounding. Energy bills. In the last three years the average family's energy bill has gone up by more than £300 a year. And rising energy bills have a knock on effect in all sorts of other ways too - if it costs supermarkets more to heat and power their stores, for example, then the price of food goes up too.

Energy companies have a whole heap of reasons why they claim energy bills are going up - wholesale costs, network charges, social and environmental obligations. All of that may be true. But if energy companies want to point out what they think is causing people's bills to rise, it's only fair to point out how their profits have increased too. As I've set out today, one of the reasons people's energy bills have increased so sharply in the last three years is because energy companies are now making much more profit than they were. In 2009, Britain's big six energy companies made just over £2 billion in profit. Last year it was nearly £4 billion. Overall, in the last three years, the energy giants have enjoyed a huge windfall of £3.3 billion in extra profits. That £3.3 billion on top of the profits they were already making.

So the question people are asking themselves is why is David Cameron not stopping these companies from ripping people off? It's not like he hasn't had the opportunity. This Government has introduced two Energy Bills since the last election. But neither of them have done anything to help hard-pressed consumers, or rein in the energy giants. Last autumn the Prime Minister made his now infamous promise to force the energy companies, by law, to put everyone on the cheapest tariff. Last time I checked my energy bill didn't appear to have been reduced. And when you read the small print you find out that this policy won't actually affect most people, because it only applies to a tiny fraction of the public on really old tariffs.

But the biggest problem is this Government's attitude. David Cameron is so out of touch that he doesn't think the energy companies are responsible for rising bills - he thinks households are to blame. That's why he spends so much time tinkering will tariffs and telling people to switch around. What he's actually saying is that it's down to you. You're on your own.

What he should be doing is getting to the root of the problem and making sure that the prices energy companies sell their energy at actually reflect what it costs to produce the gas and electricity in the first place. That's why if Labour were in power top of our list of bills would be a consumers' bill to put an end to rip off energy bills. One of the reasons energy companies can get away with making so much money is because they're allowed to generate power, sell it to another arm of the same company at a price that's never disclosed, before finally selling it on to the public. So we've proposed that all the energy that's generated should be put into a pool, which anyone could compete, on price, to sell to the public. That would increase competition, keep prices in check and help inject more transparency into a very murky market. Interestingly, according to research by IPPR last year, if the energy market was more competitive, efficiency savings alone would knock £70 a year off the average energy bill - almost equivalent to the costs of investing in new clean energy and insulation, which energy companies like to blame for rising bills. And if energy companies didn't do it first, we'd give a tough new regulator the power to make them cut their prices when costs fall.

People in Britain know that, rather than never having had it so good as the Tories try to tell them, rising energy bills are one of the main reasons they are finding it harder and harder to make ends meet and are having to make their money stretch further all the time. We know that David Cameron stands up for the wrong people. It's time for him to wake up and adopt Labour's plan to reform the energy market to get consumers a fair deal - not keep filling the pockets of the big energy companies.