Liberum Capital equity research analyst Peter Atherton warned that Labour’s energy policies pose “a life threatening problem” because market participants would not be able to react to commodity prices.
He said: “There are reasons we have independent economic regulators, and there are reasons why we have the competition and markets authority – it’s to stop politically attractive but economically insane policies like this.”
Michael Pollitt, assistant director of the energy policy research group at the University of Cambridge, agreed that the proposed price freeze would not be beneficial for consumers.
He added: “ will either be so high it will be meaningless, or it will bind and it will lead to shortages – not necessarily in electricity but certainly in investment.
“It’s not an economically sensible policy to help hard pressed consumers.”
However, shadow energy secretary Caroline Flint defended the policy, saying: “Part of this is resetting the market and getting it to a better place than where we are now.”
She added: “During the period of the price freeze we will reset the energy market in a way to restore confidence in this sector.
“It’s about fairer pricing and ensuring there is confidence in the way the energy market works and that’s it’s as transparent as possible and that there is a downward pressure on costs.”