New Energy Price Guarantee - a fair measure for all or a slightly unfair redistribution?

printedinuk

Some reports suggest that the price guarantee will be applied as universal price reduction (per unit), up to a given ceiling (the new cap).  If this is the case, would this not unfairly disadvantage those who are currently on long-term fixed tariffs, below the new ceiling?  Those customers face the prospect of not being able to benefit from the reduction and yet they are equally liable to repay it, in their future bills or via future taxation, applied equally?  Surely, if the future burden of the intervention is universal, so should the benefit be?

(Although Martin's post claims seems to state that the discount will be applied univerally to all tariffs, the energy companies comments (and other sources) suggest that the discount will be applied universally, up to the ceiling, in other words, the discount will never reduce a tariff below the ceiling value)

Mstty

We are fixed below the price guarantee until month 19th of that scheme so will potentially have just 6 months of benefit from it and are fixed on the April price cap rates until then so it's a win/win. Very few will be on a 2 year fix from October 1st 2022 as the rates were far too high so all but the (3 year fixers) will dip into this government scheme at some point.

A bit like benefits/UC. We have never claimed any benefits and yet we still pay for them and consider it a part of living in the country we do.

Same big pot of taxation and money we all pay our share however it is distributed by the Government in charge at the time.

printedinuk

Mstty said:

We are fixed below the price guarantee until month 19th of that scheme so will potentially have just 6 months of benefit from it and are fixed on the April price cap rates until then so it's a win/win. Very few will be on a 2 year fix from October 1st 2022 as the rates were far too high so all but the (3 year fixers) will dip into this government scheme at some point.

A bit like benefits/UC. We have never claimed any benefits and yet we still pay for them and consider it a part of living in the country we do.

Same big pot of taxation and money we all pay our share however it is distributed by the Government in charge at the time.

I tend to agree with you but I can't help wondering if that criticism could have been squashed by simply not enforcing the ceiling when applying the reduction, i.e., discounting fixed tariffs universally.  Otherwise you're effectively penalising them (in terms of future taxation which pays for the wider bill) for looking ahead and fixing!

[Deleted User]

Disadvantage?  Maybe.  But that can be one possibility of a fixed tariff - prices can go up or down - which you know when you sign up for it.

Unfairly disadvantage?  More of a stretch.

You can't possibly think of any scheme which is objectively fair from all aspects.  People without children don't receive child benefit, yet they pay for it.  People in well-paying jobs don't receive UC, yet they pay for it.  People who aren't the ever-shrinking target group don't get Warm Home Discount, yet they pay for it.  People with private health insurance are less likely to use the NHS, yet they pay for it.

If you're on a fix below the new cap, you're not contributing to the SOLR scheme, which everyone else is.  Are you volunteering to increase your payments to account for that?  Or is this just a sour mood because others 'win' and you don't?

printedinuk

Deleted_User said:

Disadvantage?  Maybe.  But that can be one possibility of a fixed tariff - prices can go up or down - which you know when you sign up for it.

Unfairly disadvantage?  More of a stretch.

You can't possibly think of any scheme which is objectively fair from all aspects.  People without children don't receive child benefit, yet they pay for it.  People in well-paying jobs don't receive UC, yet they pay for it.  People who aren't the ever-shrinking target group don't get Warm Home Discount, yet they pay for it.  People with private health insurance are less likely to use the NHS, yet they pay for it.

If you're on a fix below the new cap, you're not contributing to the SOLR scheme, which everyone else is.  Are you volunteering to increase your payments to account for that?  Or is this just a sour mood because others 'win' and you don't?

Interesting points! I'm curious about the SOLR scheme you mentioned - can't find any mention of it anywhere. Also wasn't aware that fixed tariffs are inherently different in terms of any taxes or other contributions - thought they just differ in terms of supplier contracts.

I do quite agree with you about the non-universality of various taxes but this is a huge state intervention in a system which was set up to be open market. The "price goes up and down" point is also, I would argue, missing the point - the price has NOT gone down but the government is artificially intervening to cause that, which is directly against the fixed vs variable tariff system. There is absolutely no way anyone could have foreseen this intervention prior to the Ukraine war etc.

Given that the cost is shared by us all, surely the fairer thing to do is simply not apply a ceiling, so the unit discount (which is, in practice, how it works) is applied universally, to all tariffs? It just seems like such an incredibly easy problem to solve, to make it fairer!

I do quite agree though, a massive government intervention like this will never be perfect.

If I may, I would also object to your description of "sour mood" - it's surely perfectly reasonable to question the efficacy or fairness of a scheme, regardless or whether we benefit from it or not.  As a UK taxpayer, it is not a given that I will benefit from it; it is, however, certain that I will (more than happily) contribute to it.  Surely I have a right to debate this point with others, otherwise what's the point in a forum?

printedinuk

Sorry, one more point about the general "unfairness" of other government benefits like UC etc, as an explanation for this...

UC, income tax etc (which some mentioned) are all targeted based upon the relative financial position of those receiving them, i.e., UC is only available to those on lower incomes etc.  That logic seems perfectly sound, in essence, "means-testing" such benefits.

In this case though, there is no such correlation between tariff type (fixed, variable) and financial position.  It could be that someone who is in the worst financial position but has locked in to a 3 year deal, will not receive any discount on their energy bill (for the reasons outlined above), while their tax contributions (in whatever form - income, VAT etc) are used to subsidise someone else's bill (on a variable tariff), who is a millionaire.

This is in contrast to some of the recent interventions (not the universal £400 payment) which were dependent on benefits etc.

lisyloo

I’d like to question this idea that we’re all equally liable to repay.
I'm going to retire in a few years a lower my tax and NI contributions.
sweeping generalisation of course but doesn’t this burden fall disproportionately on the young or in more general terms future tax payers.
I guess the devil may be in the detail of exactly how it’s going to be collected.

Mstty

lisyloo said:

I’d like to question this idea that we’re all equally liable to repay.
I'm going to retire in a few years a lower my tax and NI contributions.
sweeping generalisation of course but doesn’t this burden fall disproportionately on the young or in more general terms future tax payers.
I guess the devil may be in the detail of exactly how it’s going to be collected.

That has always been the case the generations below pay for the generations above as they enter retirement.

Again it's all a part of life and taxes.

matelodave

lisyloo said:

I’d like to question this idea that we’re all equally liable to repay.
I'm going to retire in a few years a lower my tax and NI contributions.
sweeping generalisation of course but doesn’t this burden fall disproportionately on the young or in more general terms future tax payers.
I guess the devil may be in the detail of exactly how it’s going to be collected.

Have no fear, that you'll get away with not paying tax when you retire. 

You'll still be liable for VAT on virtually everything you buy, Council Tax, Road Fund Licence, Fuel Tax and not forgetting Income Tax unless you are on a pretty low income. There are also other taxes like Car Tax and if you are unlucky, Inheritance Tax and possibly a few more that I've forgotten.

I saved for a company pension for forty years and paid into AVC's to help fund my retirement and so manage to pay virtually all my State Pension back to the Government in income tax.

I can also be pretty confident that I wont get any help with care fees, should I be unfortunate enough to need them in the future nor any other benefits from  forty years of NI payments except what I receive from the NHS in medical treatment, which is fortunately very little - I still have to pay for my glasses and dentistry.

In general it's those who paid the least that get the most and won't be paying any of it back either, so don't feel guilty when you get what you're entitled to get, especially if you've been paying in all your working life.

printedinuk

[Deleted User] said:

annabanana82 said:

jonesey1985 said:

Deleted_User said:

Disadvantage?  Maybe.  But that can be one possibility of a fixed tariff - prices can go up or down - which you know when you sign up for it.

Unfairly disadvantage?  More of a stretch.

You can't possibly think of any scheme which is objectively fair from all aspects.  People without children don't receive child benefit, yet they pay for it.  People in well-paying jobs don't receive UC, yet they pay for it.  People who aren't the ever-shrinking target group don't get Warm Home Discount, yet they pay for it.  People with private health insurance are less likely to use the NHS, yet they pay for it.

If you're on a fix below the new cap, you're not contributing to the SOLR scheme, which everyone else is.  Are you volunteering to increase your payments to account for that?  Or is this just a sour mood because others 'win' and you don't?

Yes, you can.

£400 for everyone, that was pretty fair.

The current scheme disadvantages those who were prudent in order to laud the feckless, ignorant and deluded.

But you already knew that, didn't you?

Is the "grad" in your name a hint to your communist tendencies?

I mean, most places in the UK don't end with "grad" but a surprising number of places in the USSR did.

Another one sowing the seeds of discourse, AKA a Russian botskie.

Reported.

And there was me thinking something Sparkygrad referred to a having a degree in electrics of some description...

Correct - hence the signature and my activity being mainly on the "Energy" board.  Interesting how someone jumps to me being a bot, or a paid shill, or an industry fanboi etc as soon as they don't like my opinion.

£400 for everyone, which wasn't actually for everyone, and which means that some people get a much greater benefit from it than others (I'm not sure Rishi will even notice £400, but there was someone on here recently who said that it's actually more than their bill), doesn't easily stack up as "objectively fair from all aspects".  Equality vs equity and all that.

printedinuk said:

Deleted_User said:

Disadvantage?  Maybe.  But that can be one possibility of a fixed tariff - prices can go up or down - which you know when you sign up for it.

Unfairly disadvantage?  More of a stretch.

You can't possibly think of any scheme which is objectively fair from all aspects.  People without children don't receive child benefit, yet they pay for it.  People in well-paying jobs don't receive UC, yet they pay for it.  People who aren't the ever-shrinking target group don't get Warm Home Discount, yet they pay for it.  People with private health insurance are less likely to use the NHS, yet they pay for it.

If you're on a fix below the new cap, you're not contributing to the SOLR scheme, which everyone else is.  Are you volunteering to increase your payments to account for that?  Or is this just a sour mood because others 'win' and you don't?

Interesting points! I'm curious about the SOLR scheme you mentioned - can't find any mention of it anywhere. Also wasn't aware that fixed tariffs are inherently different in terms of any taxes or other contributions - thought they just differ in terms of supplier contracts.

I do quite agree with you about the non-universality of various taxes but this is a huge state intervention in a system which was set up to be open market. The "price goes up and down" point is also, I would argue, missing the point - the price has NOT gone down but the government is artificially intervening to cause that, which is directly against the fixed vs variable tariff system. There is absolutely no way anyone could have foreseen this intervention prior to the Ukraine war etc.

Given that the cost is shared by us all, surely the fairer thing to do is simply not apply a ceiling, so the unit discount (which is, in practice, how it works) is applied universally, to all tariffs? It just seems like such an incredibly easy problem to solve, to make it fairer!

I do quite agree though, a massive government intervention like this will never be perfect.

If I may, I would also object to your description of "sour mood" - it's surely perfectly reasonable to question the efficacy or fairness of a scheme, regardless or whether we benefit from it or not.  As a UK taxpayer, it is not a given that I will benefit from it; it is, however, certain that I will (more than happily) contribute to it.  Surely I have a right to debate this point with others, otherwise what's the point in a forum?

You're right, sour mood was a bit far, but every thread at the moment seems to get a post along the lines of "someone is slightly better off than me, this is an outrage" and the discussion has been had several times.

SOLR (Supplier Of Last Resort) is the cost for all the suppliers that went bust recently.  It got added (mainly) into the electricity standing charge in April 2022.  Anyone with a fix before this point still isn't paying any of that contribution (and possibly never will as it is due to end in April 2023).

I have far more of a problem with this not being regressive than it missing out on giving even cheaper energy to people who are already below the cap.  After all, that's just what this is, a slightly different cap that the gov. have decided should apply to fixes as well as the SVT.

I don't want a massive government intervention to be fair in the sense that most seem to be using that term, particularly if I'm going to have to pay for it in the future.  I'd rather have the intended function performed in the most efficient way.

Thanks for explaining SOLR - didn't realise that this was not universally applied.

I must admit, this is a minor point but I personally believe that huge change is required in the energy sector, with lots of open debate about future investment options etc. This price guarantee is nothing more than an emergency measure, a plaster, but it still deserves scrutiny to understand how it's applied and keep on improving it.

Having said that, I think recent events have stopped public debate on that (quite rightly) - I think I perhaps should have waited until next week when normal business resumes, so we can digest the various iterations of government announcements, as they are released, with the added benefits of the opinions of industry experts!

To clarify: I am not complaining (I have not declared whether I AM on such a tariff!) but trying to understand the context of how this is applied and the rationale for the rules - the explanation of SOLR goes a long way to helping this, thanks!

@lisyloo I agree with your concern - such an intervention should always be the last resort because of the significant implications for future tax burdens. That's all the more reason why we should be questioning it, to see if we can improve it or even find a better solution. I do think some sort of extraordinary intervention is required but I'm worried we're still not considering the medium to long term changes which need to be made to prevent this happening again.

MattMattMattUK

lisyloo said:

I’d like to question this idea that we’re all equally liable to repay.
I'm going to retire in a few years a lower my tax and NI contributions.
sweeping generalisation of course but doesn’t this burden fall disproportionately on the young or in more general terms future tax payers.
I guess the devil may be in the detail of exactly how it’s going to be collected.

It falls disproportionately on the young in general, as well as higher earners. Those who do not make a net contribution will not be repaying it at all. It appears it will be added to the national debt, which is serviced from general taxation, so again the burden falls on net contributors. 

It is insane that Truss is proposing tax cuts when we are still borrowing to cover day to day expenditure, that's even before she adds £150-200 billion with this scheme, even more so when the bottom two thirds of taxpayers have the lowest effective rate of income taxation in the EU (ok, I know we unfortunately left. Also the top third have the fifth highest).