freezing the cap price

northernstar007

hi all
as most of us has been watching the news about the gas and electric, i see its been said that the price cap is to be frozen and the power co all want a gov backed loan to keep the prices down, which will be paid back by every customer which will works out almost 10k or there abouts
i prob will get blasted for this 
but why should i be paying back other peoples bills, yes i am on a fix till feb24 at same price as todays cap
i took the gamble and its paid off, yes the price will shoot up end of the contract which i am already making plans for
its wrong me and many others have to pay this loan back, just kicking the can down the street

[Deleted User]

It might because continually increasing energy prices will result in prolonged and higher inflation; food costs will continue to rise; small and medium-sized businesses including farms will go bust; there will also be a massive increase in excess deaths due to the cold, and, most likely, a massive increase in unemployment. The Plan on the table is far from perfect but it is at least a Plan. The Government is going to have to do something. 

Is it fair, probably not. The same can be said for taxation. A great chunk of my taxes is going into the build of HS2. Will I live long enough to see it open: God only knows. This is how democracies work; there are always winners and losers when Government makes difficult decisions.

I am old enough to remember the recessions of the 70s and 80s. The people most affected were not those on benefits but those just above the benefit line who got nothing from the State. Unemployment in 1984 rose to 11.9%: 10 years earlier it was 3.4%. I would not wish that period of inflation on anyone whether they are on a fixed energy deal or not.

What would you do?

pochase

Maybe for the same reason why we are paying a higher standing charge to cover the for the money those with the suppliers that went bust would have lost otherwise. Or why do we all have to pay the additional cost for Bulb customers due to administration cost soon?

This is about solidarity, a bit like a backward insurance, you only start paying once there is a problem.

Instead of the 1.4 million bulb customers having to pay over £2000, we all (28.1 million households) will pay over £100 additional standing charges.

si_74

I understand this point of view totally, however I don't share it.

I took a fix in June that was about 24% above the current fix. It was my gamble. I messaged on this forum about at the time and received various bits of feedback that it was too expensive to go for. My opinion was that I wanted certainty and felt prices were only going in one direction. However I accepted that it was my risk and that if worse came to worse i would pay the exit fee (which is £300!) and be happy to do so if prices were not so bad.

That being said I am not a fan of this idea, I think the help needs to be targeted at those that need it the most. There will still be winners and losers and yes some further help for everyone would be ideal.......but there are those that are going to be in a financially critical position due to energy prices and they are the ones that need it most. Would I pay a bit more so that they are warm over winter without spiralling into debt? Yes!

I would also add in that any idea that comes from an energy company, and has the backing of other energy companies creates a massive red flag in my mind.....

[Deleted User]

si_74 said:

I understand this point of view totally, however I don't share it.

I took a fix in June that was about 24% above the current fix. It was my gamble. I messaged on this forum about at the time and received various bits of feedback that it was too expensive to go for. My opinion was that I wanted certainty and felt prices were only going in one direction. However I accepted that it was my risk and that if worse came to worse i would pay the exit fee (which is £300!) and be happy to do so if prices were not so bad.

That being said I am not a fan of this idea, I think the help needs to be targeted at those that need it the most. There will still be winners and losers and yes some further help for everyone would be ideal.......but there are those that are going to be in a financially critical position due to energy prices and they are the ones that need it most. Would I pay a bit more so that they are warm over winter without spiralling into debt? Yes!

I would also add in that any idea that comes from an energy company, and has the backing of other energy companies creates a massive red flag in my mind.....

As I said before, you have to have been through a period of very high inflation to know how bad it can become. I was married with a young (sick) child living in rented accommodation in the 70s. In the space of 6 months, we went from being a family that was managing to one that had to choose between eating or keeping our sick child warm. My income was above the limit for any State help - as was the case with many of my friends. What criteria does the Government use to come up with a formula to help those who are in a ‘financially critical position’? Trust me, the present ‘checks and balances’ won’t work. The net for assistance has to be spread a lot wider than helping those who are currently in receipt of benefits. 

If the idea of capping prices is flawed, then why are other countries going down this road? Their Governments must know that the support is going to have to be paid for either by consumers or taxpayers.

pochase

I assume we are talking about this (or similar ones)

Keith Anderson, chief executive of Scottish Power, has proposed capping household energy bills at about £2,000 a year, with suppliers covering the gap between the cap and the wholesale price of gas and electricity by borrowing from the government’s “deficit fund.”

The company estimate that such a policy would cost £100 billion.

What I am missing is a bit more detailed information. For how long will the 100 billion last? When it is used up and the cap is not below £2000 what happens? We borrow another £100 billion and the tax payers pay back the first £100 billion?

How will the 100 billion be paid back and over what time?

For me that is a mice plan of energy suppliers reducing the risk of bad debt, without any risk to themselves. They will be fully paid, and the tax payer will cover their risk.

To follow @northernstar007 logic, he has fixed his tariff, and the energy supplier has hedged the cost for his energy, so they are not making a loss on his energy that needs to be covered, so he will be paying over years without having had a benefit from this.

Staffordian11

Nice as it might seem, I don't see this plan to fix prices at current levels being seriously considered.

For one thing, it's too blunt a tool. Very wealthy folk in big houses who don't even notice the bills will gain most.

Second, those at the opposite end of the spectrum are struggling with current prices, so a cap freeze will still see them struggle.

Third, it's a sticking plaster, not a solution as it does nothing to address the longer term.

Fourth,  it will be seen as assisting the "big bad" suppliers as they will be insulated from a fair amount of bad debt and arrears.

Fifth, it does nothing much to encourage energy savings if users are insulated (pun intended!) from the true cost of what they use.

I don't have answers, but suspect targetted assistance will be the fairest and cheapest option, coupled with longer term incentives to reduce energy use and focus on renewables and a lower dependence on gas, with it's environmental and financial costs.

MattMattMattUK

northernstar007 said:

hi all
as most of us has been watching the news about the gas and electric, i see its been said that the price cap is to be frozen and the power co all want a gov backed loan to keep the prices down, which will be paid back by every customer which will works out almost 10k or there abouts
i prob will get blasted for this 
but why should i be paying back other peoples bills, yes i am on a fix till feb24 at same price as todays cap
i took the gamble and its paid off, yes the price will shoot up end of the contract which i am already making plans for
its wrong me and many others have to pay this loan back, just kicking the can down the street

The cap will not be frozen, both of the Conservative leadership candidates have specifically ruled it out, the fact that it is a headline Labour policy makes it utterly toxic for them.

As for why you should help out other people, that is society, unless you have an adult lifetime (18+) average income of greater than £36,000 in 2020 pounds then you are not a net contributor, so are being subsidised by other taxpayers anyway. 

[Deleted User]

Staffordian11 said:

I don't have answers, but suspect targetted assistance will be the fairest and cheapest option, coupled with longer term incentives to reduce energy use and focus on renewables and a lower dependence on gas, with it's environmental and financial costs.

The part of the population who struggled the most in the 70s and 80s were the millions of people who prior to the crisis were in ‘the just getting by’ category. There were not entitled to any State benefits but they found themselves facing increased costs across the board. Unemployment quadrupled as businesses went to the wall. Taxpayers are on the hook for unemployment benefits.

Even if we had a functioning Government, I am not sure that targeted assistance is either fair or possible. The Holy Grail of weaning ourselves off gas is also decades away.

Staffordian11

Dolor said:

Staffordian11 said:

I don't have answers, but suspect targetted assistance will be the fairest and cheapest option, coupled with longer term incentives to reduce energy use and focus on renewables and a lower dependence on gas, with it's environmental and financial costs.

The part of the population who struggled the most in the 70s and 80s were the millions of people who prior to the crisis were in ‘the just getting by’ category. There were not entitled to any State benefits but they found themselves facing increased costs across the board. Unemployment quadrupled as businesses went to the wall. Taxpayers are on the hook for unemployment benefits.

Even if we had a functioning Government, I am not sure that targeted assistance is either fair or possible. The Holy Grail of weaning ourselves off gas is also decades away.

I agree it isn't easy, but as an example of (very crudely) targeted assistance, the £400 scheme could be considered as such. And a larger version of this could be implemented. Whilst it is badly targeted in that everyone gets it, it doesn't give more help to heavy users and the wealthy. and those just about managing will find a fixed sum far more beneficial than someone much better off.

Couple it with perhaps a larger increase for recipients of some benefits, and maybe a higher amount for pensioners winter fuel allowance and even then it shoud surely be much cheaper than a complete cap freeze.

And surely even our disfunctional government could cut and paste what they did when they implemented the £400?

[Deleted User]

Staffordian11 said:

Dolor said:

Staffordian11 said:

I don't have answers, but suspect targetted assistance will be the fairest and cheapest option, coupled with longer term incentives to reduce energy use and focus on renewables and a lower dependence on gas, with it's environmental and financial costs.

The part of the population who struggled the most in the 70s and 80s were the millions of people who prior to the crisis were in ‘the just getting by’ category. There were not entitled to any State benefits but they found themselves facing increased costs across the board. Unemployment quadrupled as businesses went to the wall. Taxpayers are on the hook for unemployment benefits.

Even if we had a functioning Government, I am not sure that targeted assistance is either fair or possible. The Holy Grail of weaning ourselves off gas is also decades away.

I agree it isn't easy, but as an example of (very crudely) targeted assistance, the £400 scheme could be considered as such. And a larger version of this could be implemented. Whilst it is badly targeted in that everyone gets it, it doesn't give more help to heavy users and the wealthy. and those just about managing will find a fixed sum far more beneficial than someone much better off.

Couple it with perhaps a larger increase for recipients of some benefits, and maybe a higher amount for pensioners winter fuel allowance and even then it shoud surely be much cheaper than a complete cap freeze.

And surely even our disfunctional government could cut and paste what they did when they implemented the £400?

Increasing the £400 rebate comes out of taxes which could lead to increased Government borrowing. It also has no effect on inflation.

A commercial loan, which caps energy prices, works through to zero energy inflation in 12 month’s time. Lower inflation reduces Government loan repayments (less interest) and protects businesses and employment.

We shouldn’t let the pursuit of the perfect be the enemy of the good. Or, as my old English teacher used to say ‘a diamond with a flaw is better than a pebble without one’.