£2500 Price Cap Martin's view

sienew

Robgmun said:

"The big benefit, and problem, of this is (almost) everyone gets it."

Mr Lewis has been heroic and I think he's great, but It's phrases like this that get my goat, why shouldn't I benefit? I worked my behind off my whole life and Middle-income workers like me have been shafted lately and watching on the sidelines as those who are considered poor and on benefits get handout after handout after handout.

Without the price cap freeze my bills would have gone up from £97 a year ago to over £550 by next April, that's crippling to us and 10,000's of families across the country. Unless of course, the plan is to destroy the middle and make everyone poor and on benefits.

As a middle earner you will almost certainly end up paying the money back, plus interest, either through energy bills or taxation.

Helping the poorest 20% who will by far struggle most doesn't cost 20% of the cost of this package, it costs more like 10% as they tend to be much lower users, smaller houses, less appliances, already cut back a lot just due to being poor. This means the amount repaid would be MUCH MUCH lower and would be almost unnoticeable on most bills.

The argument can be made for middle earners this isn't really help but a buy now pay later scheme.

Generally how taxation works is that the very rich pay for the very poor. Middle earners pay for themselves. This means if this is added to either taxation or your bill you will end up paying this money back. That brings up the question... is this help at all? Or is it just essentially a buy now pay later scheme for middle earners? And like many middle earners here have argued, they would rather pay an extra £2,000 a year on their bill this year (with reduced usage this might be cut down to say £1500) than pay an extra £210 a year for the next 10 years. And what happens in 18 months if prices haven't gone down?

artyboy

The_Green_Hornet said:

bomdabass said:

Any chance I can just pay the going rate and opt my children out of 20 years of higher bills?

Any chance I can just pay the going rate and opt out of artificially high bills when prices inevitably fall?

The unintended consequences of this will be massive and none of them good

One possible option would be to emigrate but then that is probably a bit of an extreme solution.

Getting less extreme by the day, I would say...

TheBanker

Mstty said:

Astria said:

Mstty said:

Also will the freeze price per kWh only apply to the first £2500 worth of energy then it goes up to the price cap rate?

That would cause a lot of people to think and cut back on their energy usage to try and not exceed that figure, but I fear it will be difficult to implement and confuse a lot of people, causing mass phone calls and complaints when they see their electric go up from 30p/unit to 69p/unit.

In my little utopian brain it made sense.

But yes to the masses that still don't understand pence per kWh and what a price cap actually means maybe they need to learn through their mistakes.

I think people would understand it, if it was explained properly. It's not that different from a typical mobile phone contract where you get xGB of data included each month but pay quite an expensive rate if you go over it. The problem would be, over what period would the 'cheap rate allowance' apply? I imagine it would need to work on an annual basis so you could 'save' your Summer allowance for the Winter. 

The bigger problem is how to set the limit. Obviously the energy needs of a family with young children are different to a single person who's out at work all day. And the needs of a pensioner couple who are home all day will be different. Would you apply the allowance per household (in which case small households will probably never exceed it), or per person (which is complex)? And somehow the system would need to integrate with fixed rate tariffs, people moving house, people switching suppliers, EV and Economy 7/10 tariffs, people who only have electric but no gas, people who never submit meter readings... I suspect this is the reason it will end up in the 'too difficult' pile!

Clavas

northernstar007 said:

i`m on a fix and staying on it, more or less todays rate till feb24

I think the best option is to waive any early exit fees for anyone signing up to a fix since 1st July.
This then gives people their own choice of staying with their current fix or moving to the new "price freeze"

sienew

TheBanker said:

Mstty said:

Astria said:

Mstty said:

Also will the freeze price per kWh only apply to the first £2500 worth of energy then it goes up to the price cap rate?

That would cause a lot of people to think and cut back on their energy usage to try and not exceed that figure, but I fear it will be difficult to implement and confuse a lot of people, causing mass phone calls and complaints when they see their electric go up from 30p/unit to 69p/unit.

In my little utopian brain it made sense.

But yes to the masses that still don't understand pence per kWh and what a price cap actually means maybe they need to learn through their mistakes.

I think people would understand it, if it was explained properly. It's not that different from a typical mobile phone contract where you get xGB of data included each month but pay quite an expensive rate if you go over it. The problem would be, over what period would the 'cheap rate allowance' apply? I imagine it would need to work on an annual basis so you could 'save' your Summer allowance for the Winter. 

The bigger problem is how to set the limit. Obviously the energy needs of a family with young children are different to a single person who's out at work all day. And the needs of a pensioner couple who are home all day will be different. Would you apply the allowance per household (in which case small households will probably never exceed it), or per person (which is complex)? And somehow the system would need to integrate with fixed rate tariffs, people moving house, people switching suppliers, EV and Economy 7/10 tariffs, people who only have electric but no gas, people who never submit meter readings... I suspect this is the reason it will end up in the 'too difficult' pile!

It's almost certainly too difficult to have working and setup in 3 weeks. It is a good solution longer term though. Each individual has a yearly allowance (to cover essential use) and extra use is billed at a higher rate. I do think this strategy does have many advantages that are really quite interesting.

A lot of your questions are solved by the electoral register. It has the number of people in the property and their ages. If it was done per person it would actually work for most scenarios out of the box. I'll use a simple £ figure to make things easier to explain but a single person might get a £1,000 a year allowance of cheap energy, the family of 4 you talk about  would get £4,000. That would cover both those groups quite fairly. The electoral register has the ages of everyone in the house so could be used to give additional allowances to the elderly. The only real gap I see would be the disabled and those with additional support needs but they could probably be accounted for in the benefits they receive.

The plan does need more work though. As an idea it's good, in practice it needs more thinking about by people who are smarter than me. 

busybee100

There's a lot of desperate people scrapping between themselves and deeming others not worthy. ☹️

Anyone worried about the future cost and "paying it back" should consider the future without the cap. Those people you think shouldn't get help will have less money to spend. Businesses will go under very quickly with the double whammy of higher energy prices and no disposable income.


I am in favour of quotas though, a reasonable price for the first 10k? Units then after that it's the going rate. There can still be market for different tarrifs.

And we need to invest in green energy and nuclear. We need to be self sufficient.

Ultrasonic

Clavas said:

I think the best option is to waive any early exit fees for anyone signing up to a fix since 1st July.

Why specifically the 1 July cut-off? I'd argue there should be no date threshold myself.

TheBanker

sienew said:

Robgmun said:

"The big benefit, and problem, of this is (almost) everyone gets it."

Mr Lewis has been heroic and I think he's great, but It's phrases like this that get my goat, why shouldn't I benefit? I worked my behind off my whole life and Middle-income workers like me have been shafted lately and watching on the sidelines as those who are considered poor and on benefits get handout after handout after handout.

Without the price cap freeze my bills would have gone up from £97 a year ago to over £550 by next April, that's crippling to us and 10,000's of families across the country. Unless of course, the plan is to destroy the middle and make everyone poor and on benefits.

As a middle earner you will almost certainly end up paying the money back, plus interest, either through energy bills or taxation.

Helping the poorest 20% who will by far struggle most doesn't cost 20% of the cost of this package, it costs more like 10% as they tend to be much lower users, smaller houses, less appliances, already cut back a lot just due to being poor. This means the amount repaid would be MUCH MUCH lower and would be almost unnoticeable on most bills.

The argument can be made for middle earners this isn't really help but a buy now pay later scheme.

Generally how taxation works is that the very rich pay for the very poor. Middle earners pay for themselves. This means if this is added to either taxation or your bill you will end up paying this money back. That brings up the question... is this help at all? Or is it just essentially a buy now pay later scheme for middle earners? And like many middle earners here have argued, they would rather pay an extra £2,000 a year on their bill this year (with reduced usage this might be cut down to say £1500) than pay an extra £210 a year for the next 10 years. And what happens in 18 months if prices haven't gone down?

I am probably towards the higher end of the middle earner bracket. Certainly I could afford to pay the higher bills, even based on the January/April 2023 projections. The impact would be putting less in my savings each month. (For those wondering, yes I have posted in other threads about my plans to reduce usage - this is to maintain my savings rather than diverting them to the energy company).

As a higher earner, it means I pay more tax than average. I've never really had an issue with this because I value the fact that we have a National Health Service, free at the point of use. I value the fact that there's a welfare system to help people who've fallen on hard times. And I am realistic enough to understand that someone has to pay for these things. Although I disagreed with the mechanism, I did agree with the principal behind the National Insurance increase to fund social care.

I will benefit from any price freeze and from the £400 payment, but my 'benefit' will be a higher savings account balance than if I didn't receive the government help. I may spend that money on a holiday next year. I am not sure this is the government's intention but it is the reality. I say this not to gloat, but to explain how high earners are going to benefit. Personally I am not sure this is the best use of public money, but as far as I know there's no way to opt out.

The problem with trying to limit who receives help is that income is a crude measure. My surplus income would be less if I had children to support (I don't). Some households have more than one income. Some people have one income but two houses. Some households have no income but are wealthy. Some need extra energy due to health/medical problems. So, given the short timescales, the only practical option is to provide the price cap across the board. If there was more time, then perhaps the help could be more targeted via the tax and benefits systems, but that's not possible given where we are now. 

The same problem applied to the original £150 Council Tax payment - because it was linked to the council tax banding, a lot of people will have received it who didn't really need it, like me. But others who do need it will have missed out because they happen to live in a higher banded property. 

facade

Ultrasonic said:

Clavas said:

I think the best option is to waive any early exit fees for anyone signing up to a fix since 1st July.

Why specifically the 1 July cut-off? I'd argue there should be no date threshold myself.

Fixes went up dramatically when the pundits finally realised prices would rocket up in October, I'm not sure if this happened in July though,  the fixes were still below the rates of this £2500 cap in March, I took one.

sienew

busybee100 said:

Anyone worried about the future cost and "paying it back" should consider the future without the cap. Those people you think shouldn't get help will have less money to spend. Businesses will go under very quickly with the double whammy of higher energy prices and no disposable income.

But is the energy price going to be significantly cheaper in 18 months? The current predicted peak is £6,616, we would need to fall 68% in the 12 months following that to get back to this frozen level.

The question is... are we just delaying the inevitable at an incredible cost that probably FAR exceeds £100 BILLION. It's highly likely that we find ourselves at or above the October cap in 18 months anyway, that still would require an almost 50% drop in prices in the 12 months following April 2023.

busybee100 said:

And we need to invest in green energy and nuclear. We need to be self sufficient.

An additional question is, if we are just delaying the price rises for 18 months aren't we maybe better investing that £100,000,000,000 in energy self sufficiency that won't last 18 months but would last closer to 50 years and probably set us up with cheaper and more secure energy for at least the next 100 years.

As an example you could build 4 Hinkley Point C's for £100B, each expected to supply 7% of the UK's energy needs. The expected lifetime is at least 60 years. And this isn't even our cheapest form of energy production. Our country could become energy self sufficient for generations for the cost of an 18 month support package.

*100B is the base package predictions in the media, the full package to consumers seems to be closer to £150B and could reasonably end up being £200B. Then they are talking about support for businesses which depending on what they do possibly even take the cost to £300B.