The new Energy price ceiling of £2,500 - some questions on reflection about winners and losers.

Getting_greyer

Erm, pretty sure that back in March, Sunak scrapped the 5%VAT on heat pumps and the like.  Surely that £250ish saving means both the energy price and climate crises are solved by now? 

In more serious tone: to a certain level of consumption, household energy is inelastic- the price doesn't change demand that much. If your absolute critical consumption only, the household demand doesn't change as you've nothing to cut back.  If you're high consumption on luxury energy goods, increase in price my mean you cut back on those.  Average users just suck up the higher price. With the price capped, it means less incentive for high consumption + affluent households to cut back as they have more resources.  This may potentially annoy some as untargeted, but the cap also stops those critical users from absolute fuel poverty.  

I guess better would be higher price cap around and then some form of progressive benefit to households.  Though a pro of this price guarantee scheme I guess is that is it simple and fast.

SnakePlissken

lisyloo said:

SnakePlissken said:

Plisyloo said:

SnakePlissken said:

SnakePlissken said:

Deleted_User said:

Deleted_User said:

Deleted_User said:

Deleted_User said:

There aren't that many massive mansions with swimming pools and stables, but there are a lot of under-insulated detached homes owned or occupied by people with lower and middle incomes.

I'd rather accidentally give the subsidy to some that don't need it, than deliberately not give it to people who do.

Do you think that it is impossible to distinguish between the two via a limit on the amount of energy use subsidised per home or by any other means available to the government. That to exclude the high energy costs of mansions with swimming pools and stables would inevitably have caused poorly insulated bungalows to be excluded.

Also as I have pointed out the subsidy is not targeted at need and is a subsidy per kWh not a cash grant. It provides the greatest help to the highest users regardless of how excessive to need their use is. Not the greatest help to those with heating costs they cannot afford for example due to being elderly and living in a poorly insulated bungalow.

Impossible? No.

An inefficient use of time and resources to address an issue that isn't much of a problem in the grand scheme of things?  Yes.

What time and resources?

A simple upper limit on the energy use subsidised per home would be simplicity itself.

While even a far more complex system based on housing type, age and size would also be easy to implement as the government data already exists and is used for the new warm homes discount scheme. Which is done automatically with no need to apply.

Isn't much of a problem?

It's throwing away vast amounts of taxpayers money on people who have excessive use.

Money that could instead be targeted at need.

Do you know what the admin costs would be on any form of means testing

In scotland prior to scrapping prescription charges in Scotland, around 25% to 33% was used on adminstering the scheme. This normal for most means testing.

Have you thought of another far far far simpler way  and administration for it is already in place, so no extra costs....

Raise income taxes and add new bands with different rates.

That way money for cap  given to richer people who do not need it, heating swimming pools or otherwise; the money can be easily recouped.

Its only because Bampot Truss is ideologically opposed to tax that this is not being considered. Similarly to why windfall tax  is discounted

To clarify adding additional income tax bands and rates is easily acheivable with no need to invlove energy companies. It is very simple thing  to do.

In Scotland where income tax is devolved the rates and bands were tweaked several years ago to be more progressive and tax the higher earners more than the lowest earners. With 2 new income tax bands added.

So you’d catch everyone hard working on paye and miss all the rich toffs getting their income from dividends?

Do you know ahat percentage of uk population that is perchance?

Capital gains tax already  taxes income from shares, if you want we could decrease the threshold to 2k income. 

But how would you then target those who have built up isa share holdings as these are tax free?


Share dividends are also used by a lot of pension schemes from councils to companies.
How do younavoid penalising a person on 25000 pension sheme?

Anyone earning over 40000 is in richest 25% in the uk.


https://www.mygov.scot/income-tax-rates-and-personal-allowances

If you raise taxes on those above 45000 and again at over 150000 and again at over 500000 and then  over 1 million  thats hardly penalising hard working ordinary people.

No I don’t know the % but thats not usually a factor when we are discussing fairness.

a lot of wealthier people are not employees, they will be operating limited companies.
it’s common for contractors to take about £9k income so they don’t pay national insurance.

I don’t have answers, just pointing out it’s not that easy and there are ways of avoiding tax
e.g. Couple paying basic rate dividend tax rather than income tax or salary sacrifice into pensions.
ironically these tax breaks are available to and afforded by the better off.
poorer people can’t afford to put £40k into their pension to avoid income tax and NI.

Agree there is no easy solution, but an income tax model where higher earners pay a higher percent  is fairer than VAT and a windfall tax would be the fairest method.

Mstty

I still go back to my original thoughts.

Everyone should(in my opinion) only got £2500 in total of discounted energy in total then the price per kWh reverts to the Ofgem published price cap rates. (Circa £1000 per household and that's it)

That way everyone had a minimum amount of energy to not die or affect the health system and high users can make their own choices when they fall onto the higher cap prices.

I don't like this endless discounted rate and it will be abused.

My outbuilding are now for rent from local business 🤣🤣🤣 as an example.

TheBanker

Mstty said:

I still go back to my original thoughts.

Everyone should(in my opinion) only got £2500 in total of discounted energy in total then the price per kWh reverts to the Ofgem published price cap rates. (Circa £1000 per household and that's it)

I am a high earner. I am certainly in the top 25% referred to above. Although I do not like paying large bills, I could afford to without suffering hardship.

But I am also a single person and whilst I have a detached house I don't waste energy.

If you subsidised by usage up to £2,500, and assuming the OFGEM October price cap applied, you would be subsidising almost my entire bill. If measures I've put in place to save energy next winter pay off, then you would be subsidising my entire bill.

My mum, who is a pensioner, lives on her own. She's home all day and feels the cold. Her boiler is old, she doesn't have individual radiator controls and her loft insulation isn't as thick as it should be. Her bill is more than £2,500 but her subsidy would be capped.

Under any system, my mum will pay more for her energy than me simply because she needs her house warmer, and she's at home more often than I am. Even if we lived in identical houses, her bill would still be higher.

I make this point because the Government's solution doesn't seek to distinguish between me and my mum, and neither does yours. For me, your scheme would be no different to the Governments but for my mum your scheme would be worse. Is this really your intention.

Now, I know me and my mum might be unusual cases - but there will be hundreds of thousands of unusual cases. Try to adapt your scheme to cater for all of these cases, then try to implement that across multiple energy billing companies systems, in the space of three weeks.

Under the Government's system, I will have more disposable income. I will likely spend this on things which will support businesses and jobs, and attract VAT. So whilst there are many problems, there are probably some wider economic benefits to subsidising more well off people.

Mstty

I would put forward a lot of households could come in at the EPG cap or lower with education on how to run heating systems efficiently and about energy usage and waste.

Plus the elderly as mentioned before receive a substantial additional amount to the £400 already off their bill so are not doing too bad this winter under these two overlapping schemes.

t0rt0ise

I've already been done out of the council tax rebate because my social housing is in central london so has a high tax banding, and now some of you want me to pay more because this solid walled cold old house means I use more gas for heating than the average. Have a heart!

Mstty

t0rt0ise said:

I've already been done out of the council tax rebate because my social housing is in central london so has a high tax banding, and now some of you want me to pay more because this solid walled cold old house means I use more gas for heating than the average. Have a heart!

Social housing?, benefits?, pension? and endlessly cheaper energy? It all has a massive cost.

I guess once in that mindset that everything has to be provided and never go up or you are being victimised is a difficult cycle to break.

No one idea suits all but it has to be kept simple to be applied.

My nan in a 1980's 2 bed detached bungalow will have received around £1100 of help this year. Her new bill with British Gas for the coming year at the EPG price cap freeze rates will be circa £2000. We have been round and setup the boiler properly, setup the TRVs, the hot water and replaced any bulbs that were not energy efficient. Yes her Morrisons shop has gone up but realistically she is faces with a circa £100 a month for energy. 

There will always be fringe cases to any scheme, losers if you will. However they can complain about the state of social housing, lobby their MP, they can request a smaller property if appropriate and although these things take time there is two years of discounted energy to make those changes or moves.

A side note Octopus are sending people physically out to help households with energy saving. What a great idea

Coffeekup

Mstty said:

I still go back to my original thoughts.

Everyone should(in my opinion) only got £2500 in total of discounted energy in total then the price per kWh reverts to the Ofgem published price cap rates. (Circa £1000 per household and that's it)

That way everyone had a minimum amount of energy to not die or affect the health system and high users can make their own choices when they fall onto the higher cap prices.

I don't like this endless discounted rate and it will be abused.

I'm with you on this and I have really dismal income, I have been cutting back for a number of years now especially the last 12 month's. I personally think we all take for granted our life styles and are not willing to accept change unless it's for the better or suits us in an immediate positive way.

Again I've cut back my daughter and I never froze to death last year, we just spent the winter months walking round with bath robes on over our clothes (unless we had guests then I turned the boiler on), with the energy I/we cut back on throughout the year, we released 1,207kg less Co2 than we did the previous year which is a whole different kettle of fish, but we still released 1,588kg of Co2 for the year and we don't have a car.

With the prices going up more and more, households would have had to cut back on unnecessary usage and as a country we could have done so much more to reach that NetZero point (or claim) than any other one thing. No I didn't wanna pay the bonkers prices but if it made the planet a better place to live so be it.

I often wonder if the "powers that be" want us to keep using higher energy and to not pay attention to our usage as it'll affect their income/profits...

[Deleted User]

Does your energy supplier mind if you use more and give them more profit? - no, of course not, that’s how business works.

Is there some sort of shadowy conspiracy preventing people from energy saving? - no, that’s tin foil hat stuff.

Miser1964

If Britain had something like China's 'social credit' system, then unit rates could be linked to the bill payers score as a member of society. Caught speeding or annoy neighbors with loud parties - unit rates up! Do charity work or help elderly with shopping - unit rates down! Simple and fair.