Opposition proposals to freeze the price cap - fair for people who have fixed?

Max68

Mstty said:

The one big shortfall for us, that we have discussed, is that with such a scheme there isn't enough time of hardship to force people to value their energy use and cut down.

The problem is there are a lot of people who have cut down but prices from October and beyond will still be unaffordable.  I've cut down my gas usage by over half since last year and my electricity usage by a vast amount and yet I am still paying £85 odd a month and that's in summer.  7 units of gas in one month and that's probably just hot water and hob still cost £25 and come October that rises by 60% odd or whatever it is. There is hardship and then there is getting hammered financially when you can't really cut back much more.  

Steve_79_P

If we go down the route of capping the cap, the best way forward might be to freeze, say, two-thirds of 'average use' at April 2022 rates, along with fixing the standing charge. Any usage over this two-thirds is at the cap rates calculated by the existing OFGEM formulae. Would help everyone by giving a basic amount of subsidised energy whilst encouraging them to reduce their usage. Would cost less than a blanket freeze of rates and therefore less to pay back. Would also mean companies could remain competitive with fixed rates etc going forward, and still able to pass on some of the increases/decreases in wholesale rates.

Haven't coated this out but seems a reasonable approach?

Ultrasonic

If we're talking about alternative options I'm personally drawn towards the idea of tiered unit prices to provide a minimum of energy at an affordable price but then higher prices beyond this to help incentivise a reduction in energy use. Potentially with the tiers varying with council tax band to factor home size into it. Support for pensioners and those with specific health needs that dictate higher energy usage could get additional support.

The Octopus etc idea to me is disincentivising energy usage reduction by fixing at too low a level given the current situation, and like other plans appears to be predicated on prices coming down long term - which may not happen.

bristolleedsfan

This proposal has been widely reported  would take effect from January if approved by new prime minister, additional to universal £400 credits + probably additional support for those on means tested benefits etc

https://inews.co.uk/news/politics/energy-bills-could-be-slashed-by-hundreds-of-pounds-under-plans-supported-by-the-chancellor-to-lower-price-cap-1795297?ico=more_from_News

jimexbox

Dolor said:

jimexbox said:

Dolor said:

jimexbox said:

Dolor said:

A ‘plan’ is gaining momentum:

https://www.theguardian.com/business/2022/aug/15/centrica-and-octopus-back-plan-to-freeze-uk-energy-bills-for-two-years

Think of it as taking out a long-term mortgage to pay off our high energy bills over the short term.

What if you don't want to pay it back over 15 years. What about those who live with their parents, who will pay the surcharge if they move out, as well as their parents? 

One of the daftest ideas I've read so far. 

It is not an individual loan. It is a scheme whereby suppliers can claim for the difference in energy costs. When wholesale prices fall, the reduction will not be passed onto consumers. It will be used to repay the lenders of the loan.

NO ONE could ever devise a scheme which is 100% fair on everybody. There will always be winners and losers. The two main advantages of this scheme is that taxpayers do not have to find £Bns and those who use the most energy will pay back more of the loan.

In your scenario, when children move out then energy usage falls. 

I know exactly what the proposal is, obviously it's not personal loan. I would still incur part of a debt that I would be forced to pay, even if I wanted no part of this shared debt.

Incurring personal debt should be a  choice. Unless of course you want to live in a socialist state, where you are controlled from birth. No thanks. 

I would be interested to know what you would do to help people through this very difficult period that doesn’t involve some form of financial help which has to be paid back through energy bills or through taxes? 

Why do you support a blanket cap, even for the wealthy? Or even middle earners? Of course the low paid should be helped and those on benefits.

Funded through taxation, not some daft mortgage on energy bills. Which would be a regressive tax on the low paid for 15 years.

Its like a souped up version of the 'loan, not a loan' proposed this year and scrapped. 

sienew

savers_united said:

sienew said:

Dolor said:

A ‘plan’ is gaining momentum:

https://www.theguardian.com/business/2022/aug/15/centrica-and-octopus-back-plan-to-freeze-uk-energy-bills-for-two-years

Think of it as taking out a long-term mortgage to pay off our high energy bills over the short term.

Taking a "long term mortgage" or debt to pay off day to day living expenses is, and always has been, considered by almost everyone to be a terrible way to live and is the very worst form of debt. Usually long term debt is only taken out for investments that'll pay for themselves many times over (houses for most people).

Whilst I agree and something I would not consider doing myself, people are going to find themselves in a difficult place with energy costs and so alot will turn to loans, credit cards etc to see them through.

Still need to see the details, but with 2 big players in the domestic energy market now backing the idea I guess something along these lines will eventually get the green light. 

"something I would not consider doing myself"

This is why targeted support would be far better in so many ways. It would actually help those most in need (who might need to turn to credit cards, payday loans ect) while not just kicking the can down the road for those who can afford it. I think that's why the £200 loan-not-loan scheme was originally so unpopular and turned into a £400 grant instead, most who can afford it, even if it means cutting back a little, would rather take the hit today than essentially having a debt over several years.

I don't think the two big companies backing this makes much difference to be honest as they are clearly supporting this as they know they are going to have a lot of bad debt on their books come autumn. And the "don't pay" campaign supports will make that bad debt situation even worse.

tpeppers

Part of our reasoning for not fixing when we could have done is we felt the government would have to do something about the crisis, and we didn't want to be stuck paying over the odds on an expensive fix with high exit fees if the government froze the price cap. Turns out this is now a slight (albeit remote) possibility so maybe the gamble (mainly denial) will pay off. 

sienew

Max68 said:

Mstty said:

The one big shortfall for us, that we have discussed, is that with such a scheme there isn't enough time of hardship to force people to value their energy use and cut down.

The problem is there are a lot of people who have cut down but prices from October and beyond will still be unaffordable.  I've cut down my gas usage by over half since last year and my electricity usage by a vast amount and yet I am still paying £85 odd a month and that's in summer.  7 units of gas in one month and that's probably just hot water and hob still cost £25 and come October that rises by 60% odd or whatever it is. There is hardship and then there is getting hammered financially when you can't really cut back much more.  

This exactly explains why targeted support is a better solution though. Give support to those who need it, not to everyone.

The tiered unit prices mentioned above (basically first X amount of energy subsidised per person), then price cap above that, maybe even an extra tax on the very highest users could be interesting and would mean everyones basic needs are covered for a reasonable price while wastage and high use is discouraged.

I'm not sure about you but I don't mind my taxes being spent helping those in actual need, I don't want taxpayers money being spent subsidising the heating Rishi Sunak's new £400,000 swimming pool though.

bristolleedsfan

sienew said:

I don't think the two big companies backing this makes much difference to be honest as they are clearly supporting this as they know they are going to have a lot of bad debt on their books come autumn. And the "don't pay" campaign supports will make that bad debt situation even worse.

I have seen reports Eon and SP during recent months have suggested similar/same idea, they are all agreeing what is best for them not only to minimise additional bad debts also minimise credits they have to make to customers struggling.

jimexbox

sienew said:

Max68 said:

Mstty said:

The one big shortfall for us, that we have discussed, is that with such a scheme there isn't enough time of hardship to force people to value their energy use and cut down.

The problem is there are a lot of people who have cut down but prices from October and beyond will still be unaffordable.  I've cut down my gas usage by over half since last year and my electricity usage by a vast amount and yet I am still paying £85 odd a month and that's in summer.  7 units of gas in one month and that's probably just hot water and hob still cost £25 and come October that rises by 60% odd or whatever it is. There is hardship and then there is getting hammered financially when you can't really cut back much more.  

This exactly explains why targeted support is a better solution though. Give support to those who need it, not to everyone.

The tiered unit prices mentioned above (basically first X amount of energy subsidised per person), then price cap above that, maybe even an extra tax on the very highest users could be interesting and would mean everyones basic needs are covered for a reasonable price while wastage and high use is discouraged.

I'm not sure about you but I don't mind my taxes being spent helping those in actual need, I don't want taxpayers money being spent subsidising the heating Rishi Sunak's new £400,000 swimming pool though.

This fixed cap for all is about as fair as the poll tax. The poor subsiding the rich over 15 years. Of course the rich will pay too, only far less as a percentage of disposable income.