AIBU to worry about a U-turn on the energy price cap?

[DahliaMacNamara]

I have no idea if they can or would do this. If someone can explain why it would never happen, that'll make it a nice short thread. Anyone?

It would be difficult to administer but what they should do is link it to temperature - have lower rates if it drops below a certain temperature in your postcode area, so people will be able to keep warm. Higher rates at temperatures where you shouldn't really need to have heating on.

This is what I would do.

And I'd also windfall tax the energy producers on the unexpected profits they made from the increase in energy costs - not just the renewable producers as proposed by Liz/KK. Why the polluting providers aren't having to pay a windfall tax is incomprehensible (except for the fact they bankroll the tories!)

And I'd invest in the country being secure in energy generation and get it publicly owned.

So what labour are proposing basically!

bloody hell.

We can't afford to pay - its already 2.5x what it was last year even with the cap. Gas is 3x what it was last year.

The government can't drop it without some meaningful way to get actual prices down.

They've put a windfall tax on renewables which is a joke - they're only expensive because the market is broken and they're tied to gas prices. Yet they don't touch gas prices.

Introduce the same cap on gas prices and if Shell etc won't play ball threaten them with windfall taxes to get the same result. Any revenue from that goes straight to pay for capping the energy price.

The trouble with targeted help is it is expensive to get right

Sone people need more energy than others -

Do you give funds to the family who went on holiday instead of buying insulation ?
Or the pensioner in a huge house which they need to keep over 20 ?

These sort of cases will cause upset to those who just lose out

All that would happen if there was tax relief theoretically to fund wage raises - is the shareholders would keep it.
Unless it was specifically tied to wage raises. They have to prove the increased wage bill to get the tax relief.
Its still tax payer funded though really.

@DahliaMacNamara I've been watching Sky News. The cap is in place until April. After that the price would be based on current prices, which vary from day to day c£4000 per year.
Mr Hunt said they will review things...so maybe there will be another cap, or there may be something more targeted? We will all have to wait and see.
At least, for winter, we all know our energy costs.

@Wheretheskyisblue
Absolutely. But the conservatives don't seem to have the wit to come up with anything other than needlessly expensive blanket schemes that they take forever to come up with. Unless you're too sick to work in which case the onus is on you to keep having to prove you're still sick for your pittance.

Since Truss has been banging on about this 2 year energy thing in every interview, the only way forward is resignation if that has gone

And sneering at Labour for saying they would only guarantee prices for 6 months...

Am slightly peeved that I was on a 12 month fixed rate and took up the offer from British Gas last week to revert to their SVR which is slightly cheaper. Wish I'd stuck with the fixed rate now!

I do understand the need to conserve but the problem for people is that this isn't a stand alone rise is it? If you are talking about this one cost in isolation then it is fine but it is the accompanying rise in costs alongside it that frighten people.

We have a smart meter and have conserved our use a lot, our bill for this month is heading for approx £100 to a £110 for minimal use. No heating at all and gas for the hob and heating water. Realistically we will need to heat our house in the last two weeks of Dec and January for maybe an hour in the morning and an hour at night to wash (victorian terrace bathrooms are brutal). The baseline costs are very high. This is fine for us to absorb for now...until the changes in our mortgage beginning next year - one product is fixed at £258 per month (2.55%) so that's okay but the other product is currently 2.8% fixed until Jan 23 monthly repayment of £544.40 - if that switches to 5% (effectively doubles we are looking at £1346 for mortgage). Add all the basic rises (food, shelter, power, fuel) together are creating the problem.

The country will be more broke when the squeezed middle have no disposeable income.

No cafes/holidays/gyms/ decorating.

If no one spends anything no money goes into the coffers.

Right I explained this a little on the Liz Truss thread in several different parts. I will try and explain as best I can, but its NOT as bad as it might sound...

First of all, the major beneficiaries were people who were the wealthiest and can afford not to reduce their useage - many of whom NEED to be reducing their useage due to energy security / global warming.

Second of all, the exact wording is the energy price guarantee will only remain universal. Key word. Universal. That means it could be means tested and still available to those on lower income.

Thirdly this needs a bit of context.
About 45mins before his statement this was tweeted:

Pound Sterling Live AT thepoundlive
Some really good news for Chancellor Hunt. Big fall in gas prices today. NatWest estimates that if the Dec '22 contract hits 300p/therm the Energy Price Guarantee becomes cost neutral. i.e. the new government's biggest spending outlay is shrinking rapidly $GBP
See graph

The gas price is currently at 403p.

Now we could see more spikes in price, however the markets seem to think there is going to be less issues with gas - indeed if demand is lower, that will keep prices lower - again it comes back to getting rich high energy users to reduce how much they consume.

So, whilst I think this announcement is extremely frightening, I also think its NOT as bad as it might sound and it is recognising that the wealthiest were benefiting most from the policy.

The people who are most vulnerable are middle earners with mortgages with high LTV.

However this response should also help to stop interest rates spiraling quite as much as the government don't have the financial black hole that the markets were terrified of.

FURTHER to this...

Faisal Islam is saying Hunt wants to incentive energy efficiency use and thats the key to look for.

Faisal was saying something about scheme in Germany where people are encouraged to use less and get financial reward for doing so.

Thats what I would like to see tbh. Regardless of the fiscal aspect. Its what we need. PLUS it will help to reduce demand which helps to drive gas prices down. Also good for all of us.

FURTHER to this...

Ben Chu AT BenChu_
Initial reaction to Jeremy Hunt moves this morning - some quick calculations.

Briefing suggests OBR was projecting medium term fiscal hole of £70bn.

HMT estimates all tax reversal now raise £32bn...

...so still leaves £38bn hole to get debt falling as share of GDP in three years.

Assume that favourable market reaction to U-turns lowers Gilt yields and interest rates by 1% - takes around £10bn off fiscal hole...

...still implies £28bn fiscal hole & £28bn of spending cuts.

So the question for markets: are those cuts politically deliverable by Hunt/Truss?

Worth noting that the NI hike reversal and the stamp duty cuts in the #miniBudget were costed by HMT at around £17bn a year by 2026-27 - surely a reversal of those (in the end) can't be ruled out too if spending cuts deemed politically impossible

Early indications are the market is reacting well. If you reverse the NI hike reversal and stamp duty cuts, that leaves a hole of £11 billion.

Thats bad. But '£11 billion bad' is not '£70 billion bad', though.

So however you spin this budget, it is better for us all. But still shit. And didn't need to happen.

FURTHER to this...

The pound is now rallying. Thats a good thing for imports. That SHOULD help particularly with food imports which the recent market instability was helping to drive inflation, and therefore the cost of living crisis. To put simply, it should mean that prices at Tesco and Aldi shouldn't rise as much as they would have done without the budget reversal.

In SUMMARY...

A lot of it is completely arse about face and not without risk. But I think people need to stop, and work out what the knock on effects of this are and what it actually means.

You take away with one hand but you should get benefits in other economic aspects which aren't as bad for us.

Also its just been pointed out on the BBC's Politics Live Show (by the presenter who is theorectically neutral) that Labour's energy intervention plan was only due to last until April anyway - which is exactly where the Conservatives have just rolled back to.

Hope that makes SOME sense...

How do windfall taxes get you more gas?

It’s not a money shortage. It’s a gas shortage. Guess what you have to do when something is physically short? You cut back.

Why on earth are you angry at the poorest and not the richest?

Usually because they reckon they will be the latter soon enough... just go to hang on a while longer, it'll trickle down any minute now!

That is the issue. If it was only gas and electric bills going up it would be easier. Instead it is also mortgages, food, childcare, everything.

yes we need to cut back in parallel to reduce gas usage and keep the lights on

but we also need to pay generators less for the gas. The lack of supply drove up prices - but it’s not costing the generators any more to extract and ship it. The excess is purely due to the war in ukraine

we (internationally not just uk) should not be accepting those prices. They aren’t normal market forces they are distorted due to war and should be capped

How do the government justify capping renewables prices saying ‘it’s not fair for them to be paid that much’ even though that’s is ‘market forces’ - yet won’t apply the same model to gas supplies?

I agree it should be something like this... There's still going to be people who don't qualify for the 'targeted support' who are going to struggle.

There are indications that we might well see some charges to the energy pricing market. See above.

This may well be part of that.

Hopefully we'll have another "Don't pay"....

The price reflects market tightness, not production costs. There’s a reason Stradivarius violins are so expensive and we can’t arbitrarily reduce price, and there are zero manufacturing costs now.

Now apply that to the master resource, energy, and you see why we’re in this situation. If everyone can afford gas, how do you dictate who gets it?

@RedToothBrush Gas price currently at 236 per therm...
Could end up expensive if people stick to a £££ budget not a usage budget iyswim. 🤦‍♀️

For anyone watching Gas prices, you can find them on the BBC Website here just scroll to the bottom(ish) of the page.

One of the key issues with energy price spikes is that is down to a lack of energy security.

Martin Lewis is on the BBC has JUST said on the BBC that the price cap going in April ISNT necessarily a problem as long as protections are managed in other ways. He says he initially caveted his support for the cap in that it was a very blunt instrument, very expensive and poorly targeted.

That should be reassuring to many.

Truss thought she was so bloody clever giving a two year guarantee instead of Labour's six months - but Labour's six months was the sensible way to go because you can't promise that scale of giveaway and retain credibility.

This whole fiasco is astounding. All I want for Christmas is a general election and then a fresh start in the New Year.

To put simply, it should mean that prices at Tesco and Aldi shouldn't rise as much as they would have done without the budget reversal.

@RedToothBrush Is it likely to mean the supermarkets will be properly stocked again with basics, do you think? I'm tired of finding all the low-priced basics gone and having to either do without or pay a fortune for a branded item.

@RedToothBrush I agree.
No point worrying now.
ML will give whoever the PM is in April (probably not Truss at this rate) a good kick up the arse to make sure something is in place to protect the most vulnerable.