Energy bills soaring because of government failure not Ukraine, says ex-Tory adviser

Households ‘paying too much because the government failed to reform the market’, says author of 2017 review

Government failure not the war in Ukraine is to blame for rocketing UK energy bills, a former Conservative adviser says.

Dieter Helm, who wrote a 2017 Cost of Energy review, questioned ministers trying to shift responsibility to Russia’s invasion as he attacked the “broken” privatisation model for energy and water.

On a visit to Kyiv last week, Boris Johnson claimed Britons are suffering soaring bills as a price the West must pay for standing up to Moscow’s aggression.

The departing prime minister said: “We know that if we’re paying in our energy bills for the evils of Vladimir Putin, the people of Ukraine are paying in their blood.”

But Sir Dieter pointed to a market system that is not “fit for purpose”, arguing it wrongly fixes prices to the cost of gas – also handing “supernormal profits” to renewable producers.

Average bills will soar to £3,549 in October – and are predicted to top £5,300 from January – despite the UK importing barely any gas directly from Russia.

“Customers faced with high bills are paying too much because the government failed to reform the market,” he told the Financial Times.

The former adviser, now an economics professor at Oxford University, argued both energy and water are “too essential to be treated like any other commodity”, as privatisation had allowed.

The sectors were undermined by “revolving doors and pork-barrel politics, heavily influenced by vested interests, with an interest in complexity, which is a lobbyist’s dream”.

This had led to the “inevitable consequences of poor regulation and bad outcomes for customers”, Sir Dieter added.

He called for both Ofgem and Ofwat, the watchdogs for energy and water respectively, to be axed and replaced with new stronger regulators for each entire system.

It follows anger over water companies pouring sewage into England’s rivers and seas and implementing hosepipe bans while failing to plug leaks that waste supplies – and paying their bosses eye-watering sums.

The Independent revealed how Liz Truss failed to hold any meetings with water bosses over the dumping of raw sewage in two years as environment secretary, despite the practice having been ruled illegal.

The likely next prime minister is in the firing line over the sewage scandal after records revealed her only talks were to discuss a bug linked to severe stomach upsets.

“It is not accidental that both the water and the energy privatisation models have run into serious trouble. After more than 30 years, neither is fit for purpose. Nor are their regulators,” Sir Dieter told the Financial Times.

On energy, he added: “Ofgem is not the right vehicle. Energy needs system regulation, not an institutional muddle with Ofgem in overall charge.”

But Ofgem said: “We are confident Ofgem regulation is robust, tackling any unfair practices by suppliers and putting consumer protection at the heart of what we do.” Ofwat declined to comment to the paper.