Why a furious Labour civil war is breaking out over the North Sea

The irony is that Rachel Reeves voted for Ed Miliband to be Labour leader in 2010. She was a newly elected MP then, although that is no excuse: if she and five other MPs had voted the right way (for his brother, David), the history of the 2015 election and of Britain’s membership of the EU might have been different.

Well, she knows better now. She drew the right lesson from Miliband’s leadership – “don’t do that again” – whereas he drew the wrong one – “I should have been bolder”.

She prevailed over Miliband to get rid of the £28bn Green Prosperity Plan, which was Labour’s policy until five months before the last election, but a similar disagreement continues, and has been made more intense by the Iran conflict.

She takes the common-sense view, backed by public opinion, that as long as we need gas it is better to get it from the British sector of the North Sea, employing British workers and paying British taxes, than importing it. Miliband takes the Green fundamentalist view that we should drill less in British waters even if that means more imports.

As with the Green Prosperity Plan, this issue is taking a long time to resolve, partly because Keir Starmer won’t decide. But there is a more urgent problem heading this way, which is likely to divide Reeves and Miliband further.

The problem is that the oil tankers that would have passed through the Strait of Hormuz during the past month have stayed where they are, and the oil supplies that would be reaching southern Asia and China will not be. The non-arrival of those ships will have consequences for Britain, because the global prices of oil and gas will rise further.

So far, Starmer has been in the “keep calm” mode of preparing for the crisis. We know the shock wave will hit us soon, but it is spreading from the Middle East at the speed of ocean-going ships, so there is a lag between cause and effect. Professor Oliver Johnson, the Bristol University mathematician who is good at explaining epidemiology, compares it to the inevitability of the arrival of the coronavirus: “We’re pretty much at the stage where Wile E Coyote has run off the cliff, and we are just waiting for gravity to do the rest.”

When the prime minister addressed the nation before Easter, he said: “I want to reassure the British people that no matter how fierce this storm, we are well placed to weather it.” That is not what international organisations with acronyms, as Michael Gove called them, have said. The IMF and the OECD have both said that the British economy is more exposed than most to an oil price shock.

But Starmer and Reeves do not want to say more because they do not want to be the bearers of bad news, or to be accused, again, of talking the country down. It is a balancing act. Governments do not want to look unprepared or complacent, but equally, they don’t want to scare people. A word out of place and there will be queues at petrol stations.

Remember Gordon Brown’s fury at Alistair Darling, when his chancellor, in a similar “calm before the storm” moment, said that the effects of the financial crash would be the worst for 60 years. There is a touch of Darling in Reeves when she said she was “angry” at Donald Trump’s decision to go to war, hinting at the economic consequences to come.

All she has done so far, though, is put down a marker, saying that any subsidy of people’s gas and electricity bills – after the price cap expires in July – will be targeted at those who need it most, rather than handed out to all households.

This is the coming battle that will follow the economic storm. Reeves will want to hold the line on spending restraint, and to avoid yet another vast increase in government borrowing – which was the response to the financial crash, the coronavirus and the Ukraine war oil spike.

Miliband, on the other hand, will want to “go big” on using the power of the state to protect people from higher energy prices. Already, he has tried to use the war in the Middle East as an argument for getting Britain off its dependence on fossil fuels. It sounds plausible in theory, but in practice, it means loading even higher costs on energy bills in the here and now, while hoping that technology will solve the intermittency problem of sun and wind power in 20 years’ time.

Reeves must not repeat her mistake of 2010. It is essential that Miliband be defeated and that economic realism prevails.