Don't Pay UK

[albie]

Oh dear, BST,

Read my post,and the NEF link, you have not understood it at all.
The energy crisis feeds into a wide range of related issues.

Address the main point, avoiding inflation and crashing the economy.

I think I understand your position.

You are opposed to cost of living wage increases, because they would be inflationary...as you told us when Andy Macdonald resigned.

You support energy prices rising, despite this being inflationary, as long as the poorest get a bit of a leg up.

You reckon there is no problem with this going straight to the big 6, as long as a one-off windfall tax takes some back.

You think the UK will need the same gas imports next year, so the coming price rise from that will be dealt with in the same way.

Gradual tweaks are the way to sort out the energy crisis, don't upset the system which caused it to come about.

Russia will have an impact on future contracts. Existing contracts will need to be honoured, as I explained.

"You want to subsidise the price (or you did a few days ago before you started claiming we could wave the issue away just because we want to)".....exactly the opposite of what I said.

I want to avoid subsidy, by capping the price at the current level.

The big 6 are nowhere near bankrupt, as you imply.
The big 6 companies have a vertical business model, so the generators and distributors are the same company - just badged differently, like British Gas and Centrica.
 
Some smaller companies will fail (they need to) , so put their customers in a public interest company.
Alongside that the tariff structure needs a complete overhaul, as I explained.

The UK could address the inequality disparity between consumers with a “social tariff” as I suggested.
More detail in the NEF link.

Public money is needed, but not to support price increases, to reform the sector.....investment in a public infrastructure.

"The issue is that you still have 50% of our supply to find from non-UK suppliers".

That would be from a much reduced overall quantity of imports. The percentage is less important than the amount needed.

"The question is: how do we address that fact without pauperising 40% of the population?”

by reducing imports, using North Sea gas in the UK (via export quota restrictions), and electrification.

Rapid electrification reduces the need to import gas, and you do that at the same time as retaining North Sea supplies for domestic use in new contracts. Electrification of industry, buildings and transport to the full potential would reduce final energy demand by 40%.

The scale of the likely hardship problem is much larger than you suggest.
Some argue 66% of UK households will be in fuel poverty (to differing degrees), by this winter heating season.

The plan you suggest supports the industry more than the consumer or the UK economy in general.
 
Following your plan, many more people will be in fuel poverty by the end of this winter.

[BigH]

This in today's Sunday Times. I advocated something similar a few months ago:

ScottishPower chief executive Keith Anderson has an interesting suggestion, though — one he first made in April, before Sunak’s initial £15 billion support package blew everything else away.

At Thursday’s summit, Anderson proposed freezing bills at £1,971 for two years. Suppliers would cover the gap between this and the wholesale price by borrowing from a “deficit fund”, underwritten by the state but filled with loans from the likes of Barclays.

Suppliers would repay the fund over 10 to 15 years, passing at least some of the cost onto consumers in that time. Taxpayers wouldn’t be on the hook other than the government guarantee, unless it was decided to cover the costs progressively, through general taxation.

Crucially, the plan would soften the impact on suppliers, too. Regulator Ofgem is worried about the sector after 30 collapses, as seen in its decision this month to update the price cap quarterly and make the way it is calculated more favourable to energy companies.

The proposal would give ministers and industry a two-year breathing space to redesign the market. ScottishPower is not alone in pushing it: Eon raised a similar proposal at Thursday’s meeting.

Now will someone please explain to me why this can't be actively progressed as a solution? And before anyone pipes up, I'm not accepting the following reasons:

- it would need state backing
- Johnson or Zahawi can't be arsed

[albie]

Looks like owd Keith has been cajoled into going for first base, and is leaving BST to stew in his juices;
https://www.theguardian.com/business/2022/aug/13/keir-starmer-demands-ban-on-raising-energy-prices

That is just a start, so lets wait for the rest of it and see if it adds up.

Social tariffs are a must...c'mon Keith, just say it....you can make it a "pledge" like those you put up for the leadership campaign!

[BillyStubbsTears]

Albie.

Starmer calling for a cap freeze doesn't change my take that it's a sub optimal answer. But it's a damn sight better than the PM candidates are proposing.

For me, in ascending order, the most-to-least bad solutions are:

1) Do nothing. Let the market decide what the price is and who can pay: That will lead to massive destitution and revolution.

2) Let the market decide the price and give tax cuts. Only helps those paying tax. The poorest go to the wall as do many less affluent income tax payers. This is Truss's current plan.

3) Cap prices. That requires big Govt borrowing and disproportionately subsidises the wealthy who use more energy.

3a) As above with confiscatory taxes on the profits of the extractors and suppliers. But those taxes will never cover the cost of capping prices. If you don't accept that, there's no sensible discussion to be had.

4) Subsidise consumers against the global market costs. That subsidy can be directed at the most vulnerable and not used to bail out those who can look after themselves. It also massively incentivised energy efficiency and non-gas energy production. It should go without saying (but I obviously do have to say it as you've somehow  convinced yourself I think otherwise) that this should go hand in hand with massive confiscatory taxes on the excess profits of the producers, for as long as the global market remains so hugely distorted.

So yeah, I don't think Starmer's plan is optimal. But I'll take it as a better than the Tory alternative.

[SydneyRover]

I sometimes disagree with Owen Jones, but this 2 minute video is on the right lines:
https://twitter.com/We_OwnIt/status/1558076187041316870?cxt=HHwWjIC-2a-Cs58rAAAA

Where are Labour and the silent knight?

They're all on holiday in Aussie, Albie, having a barbecue with Sydney Rover, the only friend they've got left.

Hope they're enjoying themselves Steve, Syd's in Sweden having a great time.

[albie]

BST,

Energy retailers actually buy 'energy futures'.  They estimate much energy they will need for next winter and agree a price now,  which may be well over (or under) the real price when the energy is used.

Smaller suppliers are re-sellers skimming the margin, and those energy supply companies that went bust had weak hedging strategies.
The rise in wholesale prices exposed their business model. Because they could not meet their contracted supply obligation at the agreed tariff, all UK consumers ended up paying to cover the gambling debts.

"Cap prices. That requires big Govt borrowing and disproportionately subsidises the wealthy who use more energy."

No, it depends on what else you do.
The UK could use the retail price structure to apply a progressive taper to consumption.

The UK needs to be a 2 or 3 tier pricing system. First tier up to say 90% of average consumption at a low cost, then a high cost for all energy over the 90% threshold, ramped up further for very high domestic consumption.

"As above with confiscatory taxes on the profits of the extractors and suppliers. But those taxes will never cover the cost of capping prices. If you don't accept that, there's no sensible discussion to be had."

You are making a false assumption about the difference between the two sides of the industry.
The energy companies like BP, British Gas and Shell operate a separate retail arm, and they sell the gas to themselves.
 
The retail side makes little or no profit ( and pays little tax ) the extraction/supply side makes the massive profits, but offsets tax liability on exploration costs.
This is why the Sunak "windfall tax" was such a scam, giving a 91p in the £ discount for further fossil fuel exploitation.

Capping retail prices is very different to capping profit on the exploration side.
The cost of exploration and extraction of reserves should not be rising in a mature industry.

You need a structure which does not incentivise restriction of supply as a method of inflating profit levels and profit taking.
The plan you support does nothing to address this problem.

[albie]

Rest easy, everyone.

The matter is in hand;
https://www.independent.co.uk/news/business/news/uk-blackouts-energy-crisis-b2144109.html
Good job we have a friend in uncle Vlad to keep an eye on us.

[big fat yorkshire pudding]

The problem on this windfall tax policy though is just how do you claw that money from overseas?  You can only take the money from UK activities.

I'm intrigued as to how Labour's fully costed plan is fully costed that will be worth evaluating.

I don't think a blanket cap on the price is right for the reasons BST mentions.  Actually what I'd do is have a cap to a certain level of usage, so tiered pricing, the more you use the higher your unit price over certain levels.  That then helps the poorest most meaning those with significant usage pay proportionately more.

[SydneyRover]

A windfall tax is just that a temporary measure and it allows the money to be used to support those struggling with their bills. One company has already stated it won't affect investment and where money is to be made companies don't hold grudges they will invest where they can make it.

[albie]

A temporary measure is not the answer, Syd.

The rise in gas prices will continue, so the UK needs to respond to that by revising how the industry works. We want the sector to change investment priorities, from fossil fuels to renewables, but they will continue with business as usual under the current arrangements.

The IPPR have produced a blog on the economics of a price cap freeze;
https://www.ippr.org/blog/freezing-the-energy-price-cap-could-fight-inflation-and-support-households

The price cap is a first step, which only has traction if the other measures are introduced (see my posts above)......Keith has not committed to the supporting measures today, which is a big mistake.

[SydneyRover]

Didn't say it was Albie, just a temporary measure

[BillyStubbsTears]

A temporary measure is not the answer, Syd.

The rise in gas prices will continue, so the UK needs to respond to that by revising how the industry works. We want the sector to change investment priorities, from fossil fuels to renewables, but they will continue with business as usual under the current arrangements.

The IPPR have produced a blog on the economics of a price cap freeze;
https://www.ippr.org/blog/freezing-the-energy-price-cap-could-fight-inflation-and-support-households

The price cap is a first step, which only has traction if the other measures are introduced (see my posts above)......Keith has not committed to the supporting measures today, which is a big mistake.

If that analysis is correct, the authors deserve a Nobel Prize because they've just reinvented economics.

There is no mechanism whatsoever whereby increasing Govt defecit spending can reduce inflation. Claiming there is is the exact equivalent of a physicist saying putting rocks in a balloon will make it float better.

[normal rules]

1.2 million people in the uk earn over 100,000.
Take away their 12500 tax allowance.
That’s an extra 2500 tax they pay each per year.
Do it for two years. They can afford it.
There’s 6 billion quid straight away.

[Superspy]

1.2 million people in the uk earn over 100,000.
Take away their 12500 tax allowance.
That’s an extra 2500 tax they pay each per year.
Do it for two years. They can afford it.
There’s 6 billion quid straight away.

The personal allowance tapers by £1 for every £2 earned above 100k already...so by the time you earn approx 125k your allowance is zero (notwithstanding salary sacrifice, etc etc)

[albie]

BST,

The UK does not have to fund these measures by further borrowing, it can be done by incorporating into the progressive tax base.
It is possible to have a steeper progressive tax taper.
This is in addition to an excess profits cap, rather than a one-off windfall tax.

If you recognise the need to reorganise the energy industry, this route would be preferable.
Unfortunately, Labour have not understood the issue beyond the impending price rise.

No mention of a social tariff, with a tiered charging structure.
No position on the decoupling of electricity prices from wholesale gas prices.....these things are easy changes without a hefty price tag.

Keith is really just acting as a political prompt to the new Tory leader.
If he manages to move Truss that is of value, but there is a risk that the Tories will pull the rug from under him in September.

The lack of coherent thinking and policy from both parties means that the crisis will just drift on, to the disadvantage of the fuel poor.

The TUC position is here;
https://www.tuc.org.uk/research-analysis/reports/fairer-energy-system-families-and-climatesition

[normal rules]

1.2 million people in the uk earn over 100,000.
Take away their 12500 tax allowance.
That’s an extra 2500 tax they pay each per year.
Do it for two years. They can afford it.
There’s 6 billion quid straight away.

The personal allowance tapers by £1 for every £2 earned above 100k already...so by the time you earn approx 125k your allowance is zero (notwithstanding salary sacrifice, etc etc)

You are missing the point. Those that earn over 100k pay nothing on their first 12500 like the rest of us. Take that allowance away. The govt would get an extra 2500 in tax from them by virtue of 20% of that 12500.

[scawsby steve]

At the moment, the only opposition to the Government on this issue is Gordon Brown.

[drfchound]

Starmer has said that he would keep the current energy price cap instead of allowing the proposed increases.
His plan would allegedly cost £29billion.
He told us where £8billion of that would come from but didn’t mention anything about the other £21billion.

[scawsby steve]

Starmer has said that he would keep the current energy price cap instead of allowing the proposed increases.
His plan would allegedly cost £29billion.
He told us where £8billion of that would come from but didn’t mention anything about the other £21billion.

He got the idea from Brown anyway.

[BillyStubbsTears]

Albie

"The UK does not have to fund these measures by further borrowing, it can be done by incorporating into the progressive tax base.
It is possible to have a steeper progressive tax taper."

I'm sorry but that's just word salad.

Who are you going to tax? By how much?

[rich1471]

Starmer has said that he would keep the current energy price cap instead of allowing the proposed increases.
His plan would allegedly cost £29billion.
He told us where £8billion of that would come from but didn’t mention anything about the other £21billion.

He got the idea from Brown anyway.

And the only stumbling block is he is not running the country

[BillyStubbsTears]

Starmer has said that he would keep the current energy price cap instead of allowing the proposed increases.
His plan would allegedly cost £29billion.
He told us where £8billion of that would come from but didn’t mention anything about the other £21billion.

He got the idea from Brown anyway.

And the only stumbling block is he is not running the country

Perfect example from Hound here of how f**ked our Democracy is at the moment.

Labour has explained where the full £30bn of its plan comes from.

You can argue whether it is reasonable.

You can argue whether it is fair.

You can argue whether it makes economic sense.

You can argue whether it's the most optimal solution.

But if you insist that they haven't even explained their numbers, you might as well give up, because you're in an alternative universe of different facts.

[wilts rover]

Starmer has said that he would keep the current energy price cap instead of allowing the proposed increases.
His plan would allegedly cost £29billion.
He told us where £8billion of that would come from but didn’t mention anything about the other £21billion.

Yes he did:

£14 billion from scrapping the £400 government handout to all households
£3.5 billion from extension of current windfall tax on energy producers
£4.7 billion in higher tax and vat tax on oil & gas sales
£7.2 billion saved from debt repayment by keeping interest rates down

it's here:

https://www.bbc.co.uk/news/62552464

[SydneyRover]

At the moment, the only opposition to the Government on this issue is Gordon Brown.

Well it's hardly you and your chum Steve is it, unless you have a political remote and can do it from the couch

[drfchound]

Starmer has said that he would keep the current energy price cap instead of allowing the proposed increases.
His plan would allegedly cost £29billion.
He told us where £8billion of that would come from but didn’t mention anything about the other £21billion.

Yes he did:

£14 billion from scrapping the £400 government handout to all households
£3.5 billion from extension of current windfall tax on energy producers
£4.7 billion in higher tax and vat tax on oil & gas sales
£7.2 billion saved from debt repayment by keeping interest rates down

it's here:

https://www.bbc.co.uk/news/62552464

Stopping that £400 handout will go down like a lead ballon.
No wonder he didn’t mention it in the interview I saw.

[Superspy]

1.2 million people in the uk earn over 100,000.
Take away their 12500 tax allowance.
That’s an extra 2500 tax they pay each per year.
Do it for two years. They can afford it.
There’s 6 billion quid straight away.

The personal allowance tapers by £1 for every £2 earned above 100k already...so by the time you earn approx 125k your allowance is zero (notwithstanding salary sacrifice, etc etc)

You are missing the point. Those that earn over 100k pay nothing on their first 12500 like the rest of us. Take that allowance away. The govt would get an extra 2500 in tax from them by virtue of 20% of that 12500.

Sorry but no, I'm not. Those that earn over 100k do not "pay nothing on the first 12500 like the rest of us", they have their personal allowance taken away at a rate of £1 per £2 earned, resulting in a marginal tax rate of 60% for everything earned between 100k and 125k. If you earn 110k, your personal allowance is not 12500, it's 7500. If you earn 120k it's 2500. if you earn 125k it's 0.

https://www.gov.uk/income-tax-rates/income-over-100000
https://taxscouts.com/high-earner-tax-returns/what-are-the-tax-implications-of-earning-over-100k/

[normal rules]

I stand corrected.you are right. When did this change come in?

[wilts rover]

Starmer has said that he would keep the current energy price cap instead of allowing the proposed increases.
His plan would allegedly cost £29billion.
He told us where £8billion of that would come from but didn’t mention anything about the other £21billion.

Yes he did:

£14 billion from scrapping the £400 government handout to all households
£3.5 billion from extension of current windfall tax on energy producers
£4.7 billion in higher tax and vat tax on oil & gas sales
£7.2 billion saved from debt repayment by keeping interest rates down

it's here:

https://www.bbc.co.uk/news/62552464

Stopping that £400 handout will go down like a lead ballon.
No wonder he didn’t mention it in the interview I saw.

The £400 handout was to cover the rise from 1st October. Under Starmer's plan there will be no rise on 1st October.

Supported by 75% of all voters and 75% of Tory voters according to YouGov:

https://twitter.com/YouGov/status/1559197050037846017

[Superspy]

I stand corrected.you are right. When did this change come in?

April 2010 according to wiki.

[albie]

BST,

"Who are you going to tax? By how much?"

Your question has been answered several times already....energy production companies (the big 6) via an energy profits cap (permanent, not a temporary windfall tax), and high gas consumption via tiered pricing structures.

A national crisis needs an early and direct response.

Take whatever is needed to fund the transition to electricity production, and use for home heating.
How much depends on the companion measures you take to support the strategy.
See 155 above.

You can also change the income tax bands to take a higher proportion contribution from the wealthy, and allocate that sum to the energy solution.
Folding the costs into the general tax burden takes advantage of the progressive taper.
 
Why are Labour paying compensation to energy retailers?
Companies are subsidised to reduce bills, rather than taken into public ownership or part-nationalised through equity financing (Government taking shares in exchange for loans or subsidy). That support will be passed on (in part at least) to shareholders.

Propping up an inefficient and failing system is counter productive.
You could save the waste of money that goes into propping up failing companies like Bulb, and redirect those funds.
Why the public purse is keeping them on life support is a mystery.

If you are re-locating the energy retail sector into the public hands, the UK could remove standing charges, which are a no consumption premium tax.
Taking energy into public ownership would mean we emerge from the crisis holding revenue-generating assets.

Starmer has left the door open for the Tories to undermine him by introducing social tariffs.
They are doing this for broadband, and Labour should have read the runes on this.
This is a no brainer for a Labour policy, but Keith is either just too timid, or very poorly advised....I think it is both!

There is no policy for small commercial users, many of whom will go to the wall in an inflationary spiral.

At some point you are going to have to face up to the fact that neo liberal economic theory just doesn't cut it.
Labour needs to think like a socialist organisation, and stop playing tinkerman.