Inside Politics: Cold wind blows

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Good morning. The biggest story in UK politics — obviously — is the energy crisis. My colleagues here at the FT have been hard at work explaining the causes and depth of the crisis. Some thoughts on all that in today’s email.

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Inside Politics is today edited by Gordon Smith. Follow Stephen on Twitter @stephenkb and please send gossip, thoughts and feedback to insidepolitics@ft.com.

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No good options

How bad is the challenge facing the next prime minister? Very. Helen Thomas explains the scale of the problem facing the UK in an excellent column:

Half of UK households face fuel poverty this winter, defined as spending more than 10 per cent of income on energy, according to EDF. A University of York report suggested a higher proportion still, particularly among large families, single parents and pensioner couples. The hit to households looks bigger than the financial crisis and more concentrated among the poorest.

David Sheppard has an essential explainer about what is causing the crisis and how long it may last.

Traders are now expecting extremely high gas prices to persist through 2023 and possibly into 2024. They anticipate there is little prospect of Russia, which before the crisis made up 40 per cent of supplies to Europe, returning to its one-time role as a reliable supplier to the market.

The UK does not have large gas storage facilities like other European countries, which have been filling them over the spring and summer for the winter ahead. Plans to reopen Rough, the UK’s largest storage facility mothballed in 2017, will come too late for this year.

There’s something important connecting both David and Helen’s pieces (in addition to the obvious). As Helen explains, the big thing the Conservatives have wasted is time:

This year could and should have been spent improving the UK’s paltry home insulation rate from 200,000 a year back towards the 2mn the market routinely managed before 2013. That was an obvious, no-regret choice six months ago. Instead, the government is currently relying on common sense and hardship to get people to reduce gas usage by 8 per cent simply by adjusting their boiler settings to run more efficiently.

That lack of time means that the next prime minister, whoever she is, will have a limited set of policy choices available. As Chris Giles sets out here, there aren’t a lot of good options available to the UK, seeing as we can safely rule out “invent time travel, and invest in home insulation and nuclear power”.

An additional problem is that while UK energy usage is higher among richer households, it is quite variable across the income spectrum, as this excellent chart from Chris’s article shows:

Preventing destitution and misery is going to have to involve a broad and large level of support for households. The Resolution Foundation’s Torsten Bell tells Chris that the only solution that does that while avoiding further inflationary pressures is a programme of handouts coupled with higher taxes on wealthier households and on businesses.

In addition to Truss’s own ideological preferences, there is limited appetite in the parliamentary party for further tax rises: it is hard to see, therefore, how the next Conservative prime minister will be able to avoid increasing UK inflation or a damaging internal war within the Tory party.

I don’t think we should put any stock in the various noises coming out of Truss’s campaign or indeed from the candidate herself about what is and isn’t on the table as far as economic support is concerned. Truss has worked very hard and played a very clever game to become prime minister and, we can therefore assume, will want to remain prime minister. There’s no plausible path to remaining in office that doesn’t run through big handouts to households and as such I think we should expect big handouts.

But we should also expect that persuading the Conservative party to accept tax rises alongside those handouts will be very, very, very difficult, perhaps impossible.

Past imperfect

Now, the political and policy consequences of the pressures on households and the wider UK economy are going to be far and away the most important factor in UK politics and at the next election. Can Liz Truss and Kwasi Kwarteng navigate these crises, or at least persuade UK voters that they are better placed to do so than Keir Starmer and Rachel Reeves?

But there will, I think, be an important secondary argument about the decisions taken and not taken over the past 12 years, and whether the opposition parties would have made better ones.

The Conservatives are carrying a wound as far as their record on insulation and on renewable energy is concerned. Rishi Sunak recently described onshore wind as causing “distress”, while as Camilla Cavendish notes in her column, Liz Truss has dismissed solar panels as “paraphernalia”. As Jim Pickard revealed back in 2020, Dominic Cummings, then an influential Downing Street aide, dismissed housing insulation as “boring”.

Labour and the Liberal Democrats have a good story to tell on renewable energy. Liz Truss has long delighted the rightwing wonk circuit taking swipes at Ed Davey’s green targets for onshore wind and other renewables, while Davey himself has had plenty of laughter lines at Lib Dem fundraisers talking about his battles during the Liberal Democrat-Conservative coalition to get the government to invest in renewables and onshore wind. As for Labour, their pledge to borrow £28bn a year to tackle the challenge of climate change from autumn of last year means they can credibly say they would have made different decisions on home insulation, as does the record of their shadow climate change spokesperson, Ed Miliband, in office.

That coalition feels a very long time ago but you can see how some of the rows over energy policy that took place behind closed doors could be forged into a bigger political argument that the Conservatives in general and Liz Truss in particular have been consistently behind the curve on home insulation and renewable energy. But both the Liberal Democrats and the Labour party are carrying a glass jaw of their own: their record of hesitation and equivocation on nuclear power, the most reliable green energy source.

While it won’t be the main event over the next few years, you can expect to hear a lot more about Conservative failures on insulation and renewables from Labour and the Liberal Democrats, and in the coming years about how no Labour prime minister matched Margaret Thatcher’s commitment to nuclear power, as the battle to define whether or not the Conservative government has done its best to combat the crisis or if their time in office has been so many wasted years.

Now try this

I had a lovely and restorative holiday in Lincolnshire. My partner and I stayed at the Studio in Hungerton, and honestly I would say the pictures understate how lovely it is. The kitchen was great and the surrounding countryside was beautiful. Our host, Isabel, was incredibly kind and thoughtful and I could not recommend it enough as a place for a couple’s holiday.

While we were there, we watched the following things, all of which are available on Disney Plus: the excellent 1987 romcom/workplace drama Broadcast News, and we finally got around to watching The Big Short (very good I thought, though not as good as the book: the FT review is here). My favourite, though, was the utterly charming second season of Only Murders in the Building.

Top stories today

• Workers cut pension contributions | Workers are leaving pension schemes or cutting their contributions, trade unions say, as the cost of living crisis prompts desperate measures that will reduce their retirement funds.

• New passport delays | For thousands of UK citizens renewing passports this year, chaos in the processing of their papers has combined with flight disruption and train strikes to create a basic service delivery meltdown.

• University students face housing crunch | Students who begin courses at several UK universities next month have been stranded without accommodation after being told there were no rooms available for them in university halls.