Government lacks faith in free market, says energy boss

The boss of British Gas owner Centrica has said some people at the heart of the Conservative government "don't believe in free markets".

Iain Conn, Centrica's chief executive, was defending the energy industry after the Tories indicated they planned to include a cap on some household energy bills in their election manifesto.

Centrica shares were hit on Monday by the proposed price cap.

Mr Conn told the BBC he was "concerned" about the government's approach.

"I think there are some at the heart of the government who just don't believe in free markets," he said.

"And I find that concerning at a time when this market is highly competitive and the UK is seeking to forge a new future relying upon free trade with the rest of the world."

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Conservative ministers have said they need to intervene because many households are paying too much for their energy bills.

The manifesto pledge would outline plans to cap bills for seven out of 10 households paying standard variable tariffs, which are often criticised as bad deals for consumers by industry watchdogs.

A Conservative spokesman said: "Our manifesto will be announced in due course - but you can expect us to be introducing new policies in this area.

"We are prepared to intervene when markets are not working for ordinary working families and that is certainly true for expensive and unfair standard energy tariffs."

Reports have suggested the Tories could seek to cut gas and electricity costs by £100 a year for 17 million families.

Analysis: 'Voicing the suspicions of business chiefs'

By Dominic O'Connell, Today Programme business presenter

To whom is Iain Conn referring? Those "at the heart of government who do not believe in free markets"?

It is, on the face of it, an extraordinary accusation to make. But had the Centrica chief executive made the same charge against the first person to propose energy price caps - Ed Miliband, who came up with the policy when Labour leader - no-one would have batted an eyelid.

Now that the Conservatives have a version of the same plan, Conn is simply voicing the suspicions of many top business people.

They have traditionally supported the Tories, knowing at least that the party's default setting was to let the market run.

Now they are not so sure. Theresa May's interventions on executive pay, corporate governance and questioning whether big business is acting in the best interests of the UK as a whole has put that former certainty in question.

Industry scepticism

Speaking to the BBC, Mr Conn conceded that the energy market was "not working perfectly".

But he added: "I just don't think capping prices is the right way to help the market and will probably have unintended consequences."

The energy industry has reacted with scepticism to the Conservatives' plan, saying it could lead to higher prices.

Shares in Centrica were up less than 1% on Tuesday, having fallen as much as 5% at one point on Monday.

If plans to cut bills by £100 came into force, British Gas "would absolutely be losing money", Mr Conn told the BBC.

Energy providers' profit margins are thinner than many realise, with British Gas making about £50 per customer after tax, he added.