Labour’s proposal to abolish Ofgem: if you don’t like the answer, change the regulator?

(by Chris Hanretty) At its party conference this week the Labour party offered starkly differing views on the value of independent authorities. On Monday, Ed Balls called for the (independent) Office of Budgetary Responsibility to audit the costings of measures in Labour’s election manifesto. On Tuesday, Ed Miliband called for (independent) energy market regulator Ofgem to be abolished and replaced by a new energy regulator with power to set retail prices.

It’s not hard to see some tension between these two proposals. Suppose that in 2018 the OBR were to issue a negative verdict on the economic plans of a future Labour government. Would we see calls to abolish the OBR and replace it with another authority capable of adopting a broader view? That’s unlikely: the whole value of the OBR depends on it operating without regard to interference like this.

Price Regulation is Not the Solution to Unaffordable Energy Prices

(by Catherine Waddams)  At the Labour party conference, Ed Miliband said he would freeze energy prices until 2017.  Miliband’s frozen energy prices might lead to frozen homes as well.  Interventions in energy markets do not have a happy history, either in California or the UK, and those who remember the public sector price freezes of the Wilson and Heath governments in the nineteen sixties and seventies may also recall the subsequent underinvestment, poor quality and shortages. Privatisation and independent regulation were seen as a solution to those problems, but energy markets in particular have proved very controversial. This isn’t the first political intervention.