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?

And yes, thank you for the sensible posts!

how would they meaningfully target support? Energy companies don’t have access to income tax/HMRC records to know who to apply a cap to.

Would the government do a payment scheme like £500 for all those on universal credit? That may target the right people but give too much to some and not enough to others, depending on their circumstances.

I don’t see how you can target without huge inefficiencies

So if they'd just done nothing to start with then we'd be better off throughout.

But LT was elected by members on a tax cutting promise - so they cut taxes and it stuffed the economy and the economy of many households!

OR

Do what other civilised countries have done, tax the profits of gas companies making billions to fund it.

You can appeal your council tax band using local similar properties with lower bands as comparables for evidence.

www.gov.uk/challenge-council-tax-band

The trouble with not providing support to some of those who don’t technically need it (usually the middle), means that they then spend their disposable income on energy bills. Which is a lot of baristas, and tourist attraction guides, and hairdressers etc. who are then out of a job.

I've heard reports that as Hunt mentioned the support would encourage energy efficiency, we're looking at a similar scheme to Germany. There, usage up to a certain limit is capped, but above that limit it would be charged at wholesale prices. That's on the (perhaps incorrect) assumption that those on lower incomes use less energy. They need to address the poor insulation, with no means to improve it by the bill payer, of rental properties if they're going to do that though!

I think that is right. We should not be subsidising people to use hot tubs or heat swimming pools.

I don't trust this government at all. Not that I am particularly trusting of any government. But something is seriously wrong. I get the impressions that any government we have at the moment, regardless of political party, will serve the demands of the IMF before considering the needs of the electorate.

The abolition of the 45p tax rate was a political error but so few people pay it that it was not going to have a significant impact on HMRC's tax take. The main tax cut that would benefit most people was the 1p cut in the lower tax rate from 20p to 19p. I think a lot of people could do with that money right now.

The daily fluctuations in the value of sterling are being orchestrated. It is not rational for the markets to be unfussed by billions in unfunded taxes being sent to Ukraine, but then to go into melt down over a 1p unfunded tax cut. The tax brackets have not risen with inflation, with the result that the higher tax rate hits at a relatively low level relative to the cost of living. On the whole, when you take little less of people in terms of tax they spend that money and it ends up back with HMRC another way. The money circulates in the economy for a bit longer and that makes everyone feel slightly better off. Right now, I am not sure it would do more than contribute a little towards utility bills.

Also, most jobs (not MPs mind) have had below inflation pay rises since before the 2008 crash. We were already getting poorer before the government blew £1 trillion on covid relief over 2 years. A significant portion of this went to government cronies for importing defective PPE that couldn't be used or to pay out to fraudulent furlough applications because there were no quality controls, no audit and no scientific analysis of the impact of shutting down virtually the entire economy for the best part of two years. Quite where they think they can get the money for Ukraine, tax cuts or even essential services is I don't know, but I do think that there are members of Boris Johnson's cabinet who should be standing trial for fraud and other related crimes in public office.

I think that is probably the fairest way to do it. So many inconsistencies doing it by income. And plus it would have the huge benefit of reducing energy useage.

I don't think the squeezed middle are spending their money on coffees out and frequent tourist attraction visits, I don't think they'd be so scared if they had a disposable buffer like that each month.

My first reaction to DH shouting 'the energy cap has gone' to me in the other room was 'what the fuck' and 'shit thats not good'.

So you aren't alone.

Its only when I've sat down and thought it out, that it seems like the only reasonable step that ANYONE could have taken at this point.

Tbh, I think the whole thing of how mortages work, what interest rates are, how the pound works against other currencies, the effect of commodity and energy price markets are really poorly understood. More people could do with understanding them better.

I don't know how you mitigate that. A lot of it, probably is at the upper end of GSCE level maths understanding. Some of it higher. Its not easy stuff. A lot of it is general knowledge rather than maths based though too.

I have to say, I was slightly relieved (massively bloody relieved) when Martin Lewis came on the TV to say pretty much what I was working out in my own head! I had a moment of panic that maybe I was completely wrong!

I still think there are a load of cavets in here. It DOES look like the gas prices might end up being lower than estimations (which is what I thought would happen - I've said on MN about this previously).

The gas price projections were based on last year's consumption rates and therefore demand. As people decide to look on their usage and be careful that should have driven down demand and therefore prices. Thats potentially a theory that can be carried forward.

If we want to look towards government savings which will help with cost of living then the very top of my list would be getting councils to have a good hard look at where they can save money on energy. Not budget cuts elsewhere. This first. Because it also have a secondary effect in terms of how it drives costs down.

I'd also look at more incentivisation of households and businesses generating their own energy as far as possible. Its doable. Perhaps with difficulties but still doable.

What energy companies need to do is lower the standing charge and let those who use lots of energy pay for doing so. Having very high standing charges is a disincentive to reduce usage. Every household should get the first X amount on a lower tariff then pay more over that rate. The elderly and disabled already get 'warmer homes' which is money if temperature very low. Personally I think no one should get more than 5 per cent rise this year. Nurses are asking for 15 percent, don't know what teachers want but usually match up to nurses. If those working got 5 percent then those on benefits could get 5 percent too. Disabled and Pensioners should get about 7.5 percent. We as a country have to reign in our spending. Everybody would like 15 percent but we can't bloody well afford it. It just builds debt for the next generation who will already be retiring later. We also need to cut foreign aid to help our own. 30 funded Nursery hours should be for those that work 30 hours each week. Less funded hours for those that chose to stay home and not work. Once children are 6 years old, parents should be expected to work at least 20 hours per week if claiming benefits. This is still only a little less than 3 days a week or 4 hours per day whilst child at school. Also economic migrants should have a job in place before coming over and not be entitled to claim benefits until paid into our system for 5 years. We have got to tighten the purse strings.

I totally agree.

A kwh 'allowance' at a capped rate: balanced according to number and vulnerability of the people in each home.

That should allow everyone a reaonable amount of energy to cover cooking, lighting, heat and power to medical equipment.

Then those of who use more than that (which includes me, btw) should pay market rate for anything over that amount.

So if they'd just done nothing to start with then we'd be better off throughout.

In a word: yes.

And the positive market response to do, will be the reasons that Liz Truss will find it difficult to survive tbh.

@RedToothBrush as always your posts are insightful and useful but I do take issue with "I think the middle are the ones who are right to be most worried by this"

There is going to be a lot of talk about the "squeezed middle" and whilst I agree they will need support due to mortgage/rent/fuel/childcare costs, I think with relation to the energy crisis, people with disabilities are much more at risk and therefore the most worried and in need of support. Equipment like adapted beds, dialysis/oxygen, stairlifts, hoists, charging mobility scooters are essentials and can't be "cut back" on. Plus the cost of being disabled and having to heat your house (or just one room) as you're inactive is essential and not a "luxury". There are so many coats associated with being disabled and the government genuinely don't give a fuck. It hasn't (to my knowledge?) even been confirmed by what measure disability benefits will be increased - and this is next year even though the cost of living has gone up hugely already. It's also hard not to feel less "powerless" as we have limited options for increasing income through employment etc - especially for those with severe disabilities. And their carers of course.

I think the burden on people with disabilities, their carers and families should be recognised as a priority but also that we should all unite together to speak up (and take direct action/protest) The fighting amongst ourselves about who is the most "worthy" and the age old working people v benefits debate, which the government love as it takes the heat off them, needs to stop. We need to start punching up instead of down, and concentrate on holding our government to account, and govern effectively.

@Grumpybutfunny

I presume you've gone totally off topic and are talking about the 1p on/off income tax?

It makes fuck all difference to take home pay, but is expensive to the Govt, it was a bloody stupid thing to do anyway.

Irrespective, you really want benefits CUT??

Out of work benefits- I don't claim any & never have, thank fuck as I have NO idea how people live on them, I really don't.

people shouldn't NEED to claim 'in work' benefits. An honest days work, no matter what you do, should pay enough to live on, increasingly it isn't.

What energy companies need to do is lower the standing charge and let those who use lots of energy pay for doing so. Having very high standing charges is a disincentive to reduce usage. Every household should get the first X amount on a lower tariff then pay more over that rate. The elderly and disabled already get 'warmer homes' which is money if temperature very low.

Our tariff is higher standing charge / lower unit cost. This works for us, as we are a low useage household. It costs us less than a low standing charge / high unit cost tariff.

I think this is more of an issue. People are stuck on shitty deals or don't know what would work out a better deal.

Rather than lowering the standing charge as your default to improve things for users, I'd like a simplification of the entire system so there isn't this mess of finding a good deal for your personal circumstances.

Why do we need a standing charge at all? Slightly higher unit prices might be more economical / encourage lower useage. With a minimum unit useage - at which point you get charged daily - for empty/low occupancy properties (like second homes).

The warmer homes tariff could be linked to the winter payment scheme in a better way too, in theory...

That buffer had already been somewhat eroded, but I think there was still some left. And there was a little light at the end of the tunnel with the proposed tax cuts, to provide a element of comfort. Whereas now, the implosion point is now definitely on its way and going to be here a lot sooner.

They’re mainly scared, not because of what’s happened so far, but for what about to happen. As you know, fear is often like that- it’s at its peak before the event. The fact that they’re scared now shows to me that the worst is still to come.

Government should increase minimum wage. They should not have to subsidise employers for having staff. People who work full time should not need to claim benefits.

@Wheretheskyisblue
What happens to people like us who have disabled children reliant on medical equipment and a warm home to survive? we use 3 times the average on a good day and BG sent a letter last week advising we need to pay 800 a month with the prices capped as they are. We had relaxed a bit knowing we were not facing any higher bill's for 2 years and now here . this government are an absolute joke . They should not be allowed to go back on their promises whenever they please.

The problem is that the North Sea is pretty marginal in terms of investment compared to the rest of the world.

The older fields are tapped out. New fields tend to be in remote and difficult to operate places.

So if there was a windfall tax, that would further disincentivise any future North Sea development, which normally planned on a timescale of decades.

If you issue a windfall tax, it's effectively like saying we will tax the crap out of you when you do well, but not help you when things are going badly. Effectively making an investment that is already marginal even more marginal.

Not only that, but it signals to other corporates that their profits could completely vanish at a stroke if its deemed politically acceptable. So it strongly disincentivises future investment in the UK across the whole of business.

So in short, it's not just free, easy money that can be hoovered up without some consequences. Otherwise the government would have already done it.

The benefit of targeting is that money goes to those who most need it. But administering it can be complicated and expensive. Universal schemes are cheap to administer.

How about this as an idea:

Every household gets their first 2,900 kWh electricity and 12,000kWh gas (you know, the typical usage amount) at the price cap rate. Households where anyone is in receipt of any benefit, be that pension credit, UC, PIP, gets all their usage at that rate. Other households pay market rate for usage above the aforementioned amounts. As simple a system as possible for confirming to energy suppliers that the household is elegible for the cheaper rate, e.g. a letter from DWP or whoever confirming the award to anyone in the household.

It’s a fairly crude form of targeting, admittedly, but I would argue better than universal support and not overly complicated.

Oh, and windfall tax on fossil-fuel generators, but not on renewable generators. And sort out the market so the price of renewable electricity is not linked to gas prices.

I think the burden on people with disabilities, their carers and families should be recognised as a priority but also that we should all unite together to speak up

Two things on this.

One you've got time to do this now.
Two I think you are going to be a very hard group to ignore.

I think the public's sense of what is fair really does allow for protections along these lines.

I think its MUCH MUCH harder to make that argument for the squeezed middle. See posts about middle classes having to cut back on their take out coffees...

Which is why I put forward the squeezed middle as the group who are most exposed to this policy shift not the disabled. Because I'm already assuming from the use of words about 'ending universal support' that the most vulnerable are already in the minds of government here.

I think its worth thinking about voting patterns too. In recent years its been more lower income households, rather than the squeezed middle who have leant support to the Tories - especially in the Red Wall areas. The squeezed professional middle class demographic are pretty solidly red. And they are unlikely to swing... Giving money to the middle won't win them votes.

The elderly and disabled already get 'warmer homes' which is money if temperature very low.

Not all disabled people are eligible for the warm home scheme. I have disabled DC and use more energy as a result but we aren’t.