The cynicism of the Secretary of State
Ed Miliband’s decision, announced towards the end of last year, to move three quarters of the cost of Renewables Obligation subsidies to general taxation was a move of profound political cynicism. In this post, I’ll try to explain why.
At first sight the move was an attempt to relieve the cost-of-living burden on consumers, albeit a moderately duplicitous one in that it simply shifted the burden from a household’s electricity bill to its tax bill. However, the decision to move only three quarters of the cost seemed strange – why not all of it?
Once you dig into the details, it turns out that the whole exercise is even more cynical than we first guessed. Playing about with subsidies was actually a diversion, intended to distract attention from a sharp underlying increase in the costs that Net Zero imposes on bills. So, if you compare the July 2026 price cap to a year earlier (Table 1), you see that while the burden of the Renewables Obligation on the benchmark electricity bill has fallen by £75, the gains have been eaten up by a 30% increase in balancing costs, a 63% increase in transmission costs and a 74% increase in capacity market costs. There was also a small increase in supplier costs.
| Element of the bill | 2025 £ | 2026 £ | Change £ | Change % |
|---|---|---|---|---|
| Direct cost | 207 | 242 | 35 | |
| Carbon taxes | 80 | 75 | -6 | |
| Contracts for Difference | 30 | 30 | -1 | |
| Renewables Obligation | 94 | 23 | -71 | |
| Feed in Tariffs | 21 | 22 | 0 | |
| Capacity Market | 25 | 44 | 19 | 74% |
| ECO and WHD etc | 41 | 36 | -4 | |
| Transmission | 54 | 87 | 34 | 63% |
| Distribution | 120 | 121 | 1 | |
| Balancing | 34 | 44 | 10 | 30% |
| Supplier and other | 176 | 190 | 14 | 8% |
| 882 | 914 | 31 |
Notably, the increases and the decreases in these controllable costs roughly balance out. In other words, the decision to move just three quarters of the Renewables Obligation subsidies to general taxation seems to have been carefully calibrated to disguise the increases in Net Zero costs.
Unfortunately, shortly after the measure was announced, events in the Persian Gulf intervened, and the subsequent increase in gas prices has left us with an increase in bills overall. Uncontrollable costs can do that to you. However, those events have also given Mr Miliband a talking point to further distract attention from long-term increases in Net Zero costs, so he won’t have been unduly worried.
Of course, Mr Miliband also said that the shift in costs is to be temporary, reversing in March 2029. But why just before the next election rather than just after it? It turns out to be another cynical political manoeuvre: reintroduction just before the election means that the price cap for April 2029 will be sharply higher, so the new government will take office against a background of a highly unwelcome rise in electricity bills.
What is worse, there will be no easy way for them to reproduce the tactic of shifting the costs to general taxation. That’s because the powers that Miliband used were temporary ones, introduced during the energy price crisis of 2022. They were due to expire last year, but the government extended them to October 2026 to enable the Renewables Obligation dodge to be put in place. By the time we get a new government, they will long since have expired, and new primary legislation will be necessary if anyone wants to pull off the same trick.
It’s impossible to say anything polite about Mr Miliband’s politicking. The story reveals a man whose objective has been to screw the public, to disguise the fact that he is doing so, and then to leave a depth charge for the next government, apparently for his own entertainment. It’s the kind of thing that might seem clever to a student politician, but is simply unbecoming for a minister of the Crown.
But there is a warning here for whichever party next takes the helm of the ship of state. Labour intends to leave poison pills for you, and you would do well to think about managing the expectations of the general public. There is a long hard road ahead.