Can Keir Starmer bring down bills before bills bring him down?

LONDON — Labour came into office promising to bring down exorbitant energy bills. 

Voters, anxious about the cost of living, expect the government to act on its pledge — but their bills are still rising.

Inside Downing Street, that is starting to cause alarm. 

“The prime minister has given all his ministers a very clear steer that bringing down bills is of critical importance,” Energy Minister Michael Shanks told the U.K. parliament last week.

POLITICO spoke to 27 energy analysts, officials, pollsters, Labour politicians and their opponents, to work out the options open to ministers and the size of the political challenge if they fail.

Many lamented a public debate marked by a lack of honesty on all sides.

Labour insists that its drive to rid the power system almost completely of fossil fuels by 2030 will bring down bills. It may well, experts say — but that’s unlikely to be in time for the next general election in 2029, the only political timeline that matters for Prime Minister Keir Starmer.

The Conservative opposition, meanwhile, along with rightwing upstarts Reform UK, blame Labour’s climate policies for high bills, ignoring the primary cause of spiraling prices: the cost of gas. 

There are options for driving down bills. But, as the government is finding, each involves a fraught political trade-off. 

‘One of the biggest concerns’

Annual average household energy costs will jump another £111 on Tuesday, up to £1,849. That’s lower than at the peak of the energy crisis, but still 52 percent higher than at the end of 2021, before the war in Ukraine drove up prices.

High prices are forcing businesses to the wall, too. Royal Stafford, a ceramics maker in Stoke-on-Trent, closed in February citing the cost of heating its kilns. It had been open for 180 years.

“The ceramics industry is in our DNA,” local Labour MP David Williams said during an inquest in parliament in March. “If we fail to act now, we risk losing not only the unique skills that … have been honed in the Potteries for hundreds of years, but the communities formed around them.”

Williams isn’t the only worried Labour backbencher. “This is one of the biggest concerns on the doorstep I hear in the constituency and around the country, especially in rural areas,” said Terry Jermy. Jermy won his countryside seat from former Conservative Prime Minister Liz Truss by just 630 votes in July.

Starmer’s enemies sense weakness.

It’s only a matter of time, said Richard Tice, a Reform MP, before the issue ignites his party’s political project. 

“People feel more and more duped. And so, as time goes on, the penny will keep dropping — and we will just keep ramming home this message that you’ve been lied to, you’ve been misinformed, you’ve been misled,” he said. 

The Tory pivot

Reform are not the only ones sharpening their attacks. 

Last month, Conservative leader Kemi Badenoch withdrew her party’s support for the U.K.’s goal of reaching net zero greenhouse gas emissions by 2050. “Responsible leaders,” Badenoch said, “don’t indulge in fictions which are going to make families poorer.”

Few energy experts agree net zero efforts are the main driver of high bills, though. “The most important factor” is the price of gas, said Guy Newey, the boss of Energy Systems Catapult. 

Tory net-zero skepticism means “surrendering us to fossil-fuel markets controlled by petrostates and dictators,” Energy Secretary Ed Miliband shot back during a debate in the House of Commons. Energy department officials pointed POLITICO to the pipeline of renewable energy already approved or seeking planning permission, which they said could start to shift electricity bills before 2029.

“Every wind turbine and solar panel we install will help cut our reliance on foreign dictators and bring down bills,” a department spokesperson said. “Over this parliament we will be working relentlessly to translate the much cheaper wholesale costs of clean power into lower bills for consumers.”

But Miliband’s position is overly simplistic, said David Reiner, a professor of technology policy at Cambridge University.

Last month, Conservative leader Kemi Badenoch withdrew her party’s support for the U.K.’s goal of reaching net zero greenhouse gas emissions by 2050. | Carl Court/Getty Images

“The government has a number of conflicting claims, which I don’t think you can fully reconcile,” he said. “The idea that we can move relatively rapidly to reduce emissions, and at the same time we see that somehow reflected in lower bills, and also have some sense of energy security — it’s not clear that we can completely square that circle.”

Labour is “not on track” to fulfil its election promise to cut annual bills by £300 by 2030, agreed Adam Berman, director of policy at trade group Energy UK. Climate policies “will lower energy bills,” he said, “but it will take time for that to materialize.”

Privately, some Labour officials admit the same.

“It’s too late in terms of [lower bills contributing to winning] a second parliament, because people want to see their energy bills come down now, not in 2030,” said a senior government official, granted anonymity to speak candidly about internal discussions.

The gas conundrum

Labour isn’t facing a full-blown public backlash yet. But one could be on its way, said Scarlett Maguire, a director at political consultancy J.L. Partners. “It’s basically there for the picking. … I would say Labour don’t have much time.”

One official close to Miliband, who was not authorized to speak publicly, said the party knew it needed to win over the public on the long-term promise of clean energy bringing stable, cheaper bills. 

“We feel we’re on the right track politically,” they said, “and we know how important it is and we know that we’ve made and will continue to make an argument to the country about getting off the up-and-down rollercoaster [of gas prices] and we need to get on and deliver.”

The same official pointed towards work by pollsters More in Common, which showed almost five times more people believe clean energy would bring down the cost of living than raise it.

Miliband likes to reference strong public support for net-zero policies, and derides his opponents as out of touch with both climate science and voters. 

But close observers of the Conservatives say its leaders think support for climate efforts is soft. 

Recent polling by Conservative peer Michael Ashcroft found six in 10 voters expect net zero to hurt them financially. Ongoing economic pain will drown out any goodwill Labour gets for a principled stance on climate change, argued Henry Hill, deputy editor of the ConservativeHome website. “The public can be all in favor of net zero — and then they can throw you out of office for higher energy bills,” he said.

Starmer knows that his options are limited because, ultimately, dramatic rises and falls in British bills will be decided far from Britain.

Getting more renewable energy online will start to eat into gas’ dominance and could begin to impact wholesale power prices within the next five years, several experts said. | Paul Ellis/AFP via Getty Images

This is because of how the U.K. energy market works. Every half hour, national electricity prices are set based on the most expensive source of energy required to meet total demand for the next 30 minutes. Right now, almost all of the time, that means gas.

Gas price is determined by regional and global market factors, something the government “can basically do nothing about at all,” said Newey from Energy Systems Catapult.

Getting more renewable energy online will start to eat into gas’ dominance and could begin to impact wholesale power prices within the next five years, several experts said. But to break the grip of commodity prices? “We’re talking about at least a decade [or] longer,” said Reiner.

“If I was the government, I would be hoping with all my heart that the gas price fell,” said Newey.

Options, options

Hence Starmer’s demand that his ministers find other ways to ease the pain. 

There are policy levers Labour can pull to try and bring down bills. But none are easy political choices. 

One is to shift so-called green levies — the 11 percent of energy bills used to pay for climate policies and clean energy — elsewhere. This could immediately drop bills by hundreds of pounds each year. Advocates say ministers could raise the same money more fairly through general taxation. 

But the government is not about to agree to the required income tax hike. “That’s unlikely to happen in the short term, given the fiscal situation that we face,” Miliband told MPs in January. 

Those levies are heavily weighted onto electricity prices rather than gas, so shifting that balance could make clean tech like heat pumps cheaper to run. But that in turn would punish those with gas boilers who can’t afford to make the switch.

Miliband’s team are also quizzing the industry about extending the length of contracts awarded to companies building green energy schemes like solar farms and wind turbines, guaranteeing returns well into the 2040s in exchange for lower prices. 

A separate proposal would scrap Britain’s national wholesale price for electricity and replace it with a string of local prices — but that process, expected to conclude in the summer, is bogged down in a row between major energy companies over whether this will help or hinder energy prices and the green transition. Government officials warn that such a major overhaul won’t bring a quick fix on bills, although advocates of the change say it could help in less than four years. 

Then there is the break-glass emergency option: the U.K. government taking on some, or all, of the green levies. In Australia, the Labor government is throwing $1.8 billion (£880 million) at pre-election bill relief, after failing to deliver on promises to cut prices. The incoming German coalition is discussing spending €50 billion (£42 billion) lowering energy costs.

But copying that would mean the Treasury raising more debt, smashing through Chancellor Rachel Reeves’ ironclad fiscal rules.

Even the Treasury’s resolve might weaken though if, as the 2029 election looms closer, Labour still hasn’t found a way to deliver for voters and for its own restive MPs.

Additional reporting by Giovanna Coi.