Money Blog: Why It's the Government's Responsibility to Bring Down Energy Prices
You & Your Money
Best Buys
Tools
Sky News
Home » Money Blog » Money Matters » Why It's the Government's Responsibility to Bring Down Energy Prices
Why It's the Government's Responsibility to Bring Down Energy Prices
By Annie Shaw
Nov 19, 05:02 PM
The heat is on the energy companies, as Government and consumers clamour for price cuts.
Cash strapped consumers have seen their domestic fuel bills soar by 51% for gas and 28% for electricity since the start of this year, and the average family now spends £1,308 a year on fuel, compared with just £554 in 2003.
Until now the Government has been able to wring its hands and plead “global market forces”. In the past few weeks, however, with oil prices falling by 44% from their peak to a two-year low, the UK’s energy prices have become an embarrassment to Gordon Brown’s team as the country struggles to beat off recession.
Oil prices are significant because oil is used to power many electricity-generating stations, and the oil price is linked to the gas price which powers many of the rest.
The situation is beginning to look as if it might end in a good old Wild West shootout. And, as far as the Government is concerned, there is no doubt that in this High Noon confrontation it is the energy companies that are wearing the black hats.
Back in the general store, the word from Age Concern is that 5.4 million Britons are living in fuel poverty – meaning they spend more than 10 per cent of their income on fuel to heat their homes. Meanwhile, the saloon is abuzz with talk of Help the Aged’s claim that around 4.5 million pensioners are being forced to stay in one heated room to save on fuel costs.
Padre Gordon Lishman, director-general of Age Concern, says: “One in three pensioner households are in fuel poverty and this Christmas many will decide whether to eat or heat.” And the Citizen’s Advice Bureau say the number of fuel debt inquiries increased by 13% during 2007-08.
Meanwhile, the Sheriff, Energy Secretary Ed Miliband, has decided to take on the Sparky Gang, calling the UK’s the six major power suppliers outside to prove that their pricing structure is fair.
But the battle to keep the gang in check is not all going his way. Last month the judge, in the guise of energy regulator Ofgem, threw out accusations that British Gas, E.On, EDF, Npower, Scottish Power and Scottish and Southern Energy were colluding to increase prices. Nevertheless, Sheriff Miliband has rounded up Sparky’s men and threatened them with the County Jail, in the form of a referral to the Competition Commission unless they can prove that they are not overcharging folk who use pre-pay meters, and explain why their best offers are only available to those who sign up for “dual fuel” gas and electricity deals.
The figures do not make pretty reading: 5.9 million energy customers are on prepayment meters – up from 4.7 million a decade ago – but only around a million of these customers are actually repaying a debt. It looks like the others are simply being overcharged.
But are the energy companies a soft target for a sheriff trying to call the shots in a lawless town?
It’s all very well to pick on fuel prices, using emotive images of freezing pensioners choosing between heating a tin of soup or turning on the one-bar electric fire. But couldn’t the government be doing more itself to help cash-strapped consumers?
No one can have failed to notice that costs have been creeping up in many areas for households. For instance, council tax went up by an average of 4.5% this year, and we are promised a bigger rise next year to make up for the losses that more careless councils have made on their deposits with Icelandic banks. Other government-imposed charges look set to rise, including fixed penalty fines, the cost of a passport and the television licence fee.
At the same time the amount of compensation that a redundant worker is allowed to receive from his employer, tax-free, has remained fixed at £30,000 for more than 20 years; the amount of interest a child can receive on money given to it by a parent without it being added to the parent’s income for tax purposes has been frozen at £100 since time immemorial; and the amount someone can receive in rent from a lodger under the rent-a-room scheme has been £4,250 since 1996, when it was raised from £3,250. The list could go on.
Even the Government’s record on fuel saving doesn’t stand up to examination. The Home Energy Saving Programme, for example, is available only to those on the very lowest incomes.
While any initiative by the Government to help people save money should be applauded, it should be remembered that one of the keystones of the new proposals – an “extra” £74 million of Government money over two years for the Warm Front programme – does not even restore an earlier £200 million cut in the 2008-11 Warm Front budget made in last October’s Comprehensive Spending Review.
Meanwhile, the squeeze on credit, which is the price we’re all paying for the spending splurge presided over by Gordon Brown, is hardly helping households struggling to meet rising mortgage payments and credit card debts.
For its part, the Energy Retail Association pleads the case for the power companies, saying that any drop in domestic prices would have to wait for a “sustained period” of low wholesale prices, because the companies entered into long-term contracts when the oil price was high.
The companies are also faced with investment targets to clean up the industry, build new plant and invest in renewable energy sources.
While this is going on, we should also consider the profitability of the energy companies. While it may seem obscene that the elderly should be left to shiver this winter by high fuel prices, we should also remember that many pensioners supplement their meagre state pensions with dividends from their investments. Their portfolios often include energy company shares. Energy firms will also feature in the holdings of company and private pension schemes. It is, therefore, in the interests of everybody that these companies are profitable, their share prices remain buoyant and they pay good dividends.
A study by the Local Government Association in September found that the power companies were actually able to increase their dividends by £257 million during 2007. Presumably the Government’s intention is that these dividends will be cut and retail fuel prices reduced.
We wanted easy credit and we have ended up with a bust banking system. Now we want our fuel prices reduced – but are we sure of the consequences?
If the Government wins the shoot-out there could be more bodies in Boot Hill than just the energy companies.
User Comments
Nash 20 November 2008, 18:01
The whole problem lies with the government. If politicians cultivate moral splendour and strive for the welfare and upliftment of the country at a time when selfishness and self-interest is so rampant and with no noble sentiments and morality.
Then the question is, why would politicians care along with their business partners for the well being of humanity(the public). This would take away there greed for power and personal gain of wealth through higher wages etc and yes their ego fame .
To combat this madness, their wages should be set by the public since it is the public who has given or employed them to do a certain job along with all councillors.
How can such people understand the suffering of the people when they do not have the same Basic Income to live on and in the real basic life of struggles.
and in poverty. They have created so much complications and confusion in politics that the public have become the scapegoats for their mistakes. They should be sacked and maybe have some pay back they money they have legally stolen from the public in high wages and expenses.
For people to have money to save and spend back into the economy , the cost of living has to be reduced to that level. How can a basic wage do that ? Have the politicians done so and proved it can be the amount one humanly will need to live on. That means able to live within a four walls, food .clothing even having a car ,etc. which the richer society takes for granted and show off.
They are a law unto themselves and the public now known as sheep, keeps the system going.
The country is exploited by the ruling institutions. which are ever growing
What gratitude do those elected give back to the people? Nothing accept to increase their own wealth.
They should be eager to be of service and to those who need help on account of their disabilities etc. when there is no sense of duty how can good deeds be produced.
Would any politician work for less pay? How much will go back to the public if they did even take a pay cut .
What a pity that this is not the measuring yard stick that judges the level of humanity and morality that resides within them and even all of us .
There is a lack of encouragement for human qualities even in friendship towards all, which would have resulted in caring for all.
An unbending person is infected with egoism of the worst kind. It is this cowardice that makes them hide the truth and in flames hatred that sharpens the edge of falsehood. If Self respecting individuals grow with self – respect and renunciation of wealth and only then they are truly fit to be called a true politician. The rich remain rich at the suppression of keeping the poor at a certain level. Where they are not allowed to think and speak out for fear of loosing more in their circumstances.
Even the police do not protect the society form wrong laws.
Fines for anything is the latest weapon to obtain easy prey wealth by all ruling institutions. Whose books are they balancing? All this adds up to a ever increasing dangerous society full of mental stress, depression and ill health. Which is costing more and dangerous sparks for unrest. No value for human life is the result . This is the paramount duty of the Politicians to remove as their pledge of duty implicates . We could go forever talking about this and still nothing will change for as the government so as the people ..and as the people so as the government. Who will change first?
Its a good thing they do not believe in God as they would have a conscious
chris baker 20 November 2008, 13:18
What do you expect when they are mostly owned by french and german we are making sure there own people get it cheap by keeping our prices high.
John R Fotherby 20 November 2008, 11:17
You don’t expect the government to do anything about energy prices, when they get increased revenue from indirect tax (VAT etc), and as we all know pensioners are the last thing the goverment care about.
lg 20 November 2008, 11:10
In a big office somewhere in britain, the fatcats of a gas and electricity supplier and there advisors are having a meeting,
advisor marley :- Pressure is growing for us to cut fuel prices.
fat cat scrooge:- So!
advisor marley :- But the nights are getting longer and the met office is reporting that this could be one of the coldest winters in years !
fat cat scrooge:- Exactly! More electric to light their homes, more gas to heat them, more profit for us!
advisor marley:- But sir! think about the pensioners, and low income familes trying to pay the bill, and thousands could die because they cant afford to heat their homes !
fat cat scrooge:- But marley, think about our profits, and our shareholders! We wouldnt want to reduce their bonuses woulde we, how would they be able to buy themselves lots of nice things.
advisor marley:- But sir!
fatcat scrooge:- NO!
A despondent marley leaves the office while scrooge swigs down the last of his expensive brandy and chuckles to himself, thinking about his 3 cars and nice warm home he is about to go home to.
Skint 20 November 2008, 08:05
Re Nationalise the lot, it is people that matter not profit.
Petana 20 November 2008, 05:50
The energy companies are saying that they have entered into contracts when the price of oil was high and therefore we all have to pay the higher prices, yet when they entered into contracts when the price of oil was lower, the consumer had to fork out immediately when the price of oil went up !!!! Where is the justice?
sarkykoont 19 November 2008, 23:14
4.5 million pensioners in 1 heated room??? must be a big room
Most Popular Talking Points
- Is the Alliance and Leicester takeover bad news for consumers?
- Should We Support The Fuel Protests?
- PPI: The Rip-Off That Benefits You
