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

MattMattMattUK

matelodave said:

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.

On "virtually everything", well apart from food, which most has no tax on, and energy bills, which only have 5% on and may still be reduced to 0%. Most retired people pay very little VAT because the majority of the expenditure is on goods/services which do not attract VAT. 

More than 85% of people arrive at pension age having cost the state more than they paid in, by the time they die after many years of claiming pensions and often needing medical treatment that brings the total number of lifetime net contributors down to around 6%. 

theoretica

It would be -one kind of- exactly fair to take everyone who is on one off fixed tariffs, whether they fixed high or low, and put every single account onto the same rate.  That would - as the current proposal does - remove the anticipated advantage from those currently on low fixes.  The current proposal still leaves the potential for people on low fixes to benefit, just maybe not as much as they hoped at one time.

[Deleted User]

theoretica said:

It would be -one kind of- exactly fair to take everyone who is on one off fixed tariffs, whether they fixed high or low, and put every single account onto the same rate.  That would - as the current proposal does - remove the anticipated advantage from those currently on low fixes.  The current proposal still leaves the potential for people on low fixes to benefit, just maybe not as much as they hoped at one time.

You've described that well - "one kind of exactly fair".

I would have moved the cap down for SVT and not touched fixes at all, then people could make the choice to break their contract or not given the new information (I wouldn't waive exit fees because I'm wary of arbitrary changes to T&Cs, but a goodwill gesture could have been suggested).  That's a different kind of fair - as it preserves the market structure and doesn't change any contract that was supposed to be fixed - but there are negatives to that approach as well which have been noted several times on the board.

@printedinuk is right though - all these things are sticking plasters until there are changes in the market and the industry.  That needs a lot of discussion and I don't think anyone has a good answer for it yet.

Mstty

theoretica said:

It would be -one kind of- exactly fair to take everyone who is on one off fixed tariffs, whether they fixed high or low, and put every single account onto the same rate.  That would - as the current proposal does - remove the anticipated advantage from those currently on low fixes.  The current proposal still leaves the potential for people on low fixes to benefit, just maybe not as much as they hoped at one time.

I would have done nothing except the £400 til January if in charge.

My reasoning is that the current price freeze is not enough to make people really reduce energy and think about what it all costs. This measure and all the other payouts mean some are paying close to last winters prices or lower.

I believe we all needed a shock then a saviour package to come in January.

Probably good I'm not in charge lol

deano2099

printedinuk said:

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.

I do feel the help should have been more targeted, but you can look at the relative financial position another way: those on good fixes already have access to affordable energy so don't need assistance. Those without good fixes don't have that access and so need help. It's targeted at a specific subset of "financial position" but it is aimed at one. Like how (in theory) money will be invested in schools in areas where schools are performing poorly, with less investment where they are performing well.

michaels

Cost of the freeze is of order £150bm

Eventually that means 150bn more tax needs to be paid - probably easiest to think of it as 4p on the basic rate of tax for 10 years.

So the question is, which would you rather, 4% higher tax rate for 10 years or to have to pay the full cost of the utility price increase over the next 2 years.

This makes the winners and losers pretty clear - high energy users who are low earners win, middle users, average income break even, high earners pay for it.

lisyloo

As someone who doesn’t need the help, I don’t think it’s been fairly targeted.

[Deleted User]

I would have just given every household £1,000. So high energy users typically better off people with large homes are not given more off their bill in cash terms and due to standing charges in percentage terms. And would call it a cost of living payment to help not just with energy but also things like food, rent.

As the energy cap rises in January, April I would have made further payments.

Keeping the energy bills high would also encourage people to reduce energy use and invest in insulation, new boilers, solar panel systems.

Mstty

lisyloo said:

As someone who doesn’t need the help, I don’t think it’s been fairly targeted.

Well you can always calculate your usage at the official Ofgem cap rates and donate it to charities that help people that cannot afford to live.

Mstty

Mstty said:

lisyloo said:

As someone who doesn’t need the help, I don’t think it’s been fairly targeted.

Well you can always calculate your usage at the official Ofgem cap rates and donate it to charities that help people that cannot afford to live.

If there wasn't an election looming in 2024 they may well have done this.

This scheme buys votes