Energy crisis solved

[d000hg]

Apparently Liz is going to fix the price crisis at a stroke - we'll all be burning branches of the magic money tree to keep warm this winter. To allay fears that this would be bad for the environment, they're rumoured to be be considering JRM for environment minister.

[jamesbrown]

Assuming the reports are true (and, tbf, there's been many different reports on the specifics).

What would've been better, then?

It seems as though most European countries (including the EU member states) are going for something broadly similar.

It's either paid for by taxpayers or billpayers or power generators or some combination of these. Sounds like they opted for taxpayers.

There should probably be an element of capped usage (for the fixed wholesale price), but I don't know how easily that would be done. The more complicated it becomes, the more difficult it is to implement. That's why furlough and the various loan schemes were massively wasteful too. But also prevented a jobs disaster.

[d000hg]

I think it's a good idea (I think) but totally at odds with everything she's been saying until now about fiscal responsibility. It's easy to look good now if you fix problems by borrowing vast sums without a plan to pay them back.

I wonder how Keir will find a way to criticise it since it's exactly what he has been asking for.

[jamesbrown]

I think it's a good idea (I think) but totally at odds with everything she's been saying until now about fiscal responsibility. It's easy to look good now if you fix problems by borrowing vast sums without a plan to pay them back.

I wonder how Keir will find a way to criticise it since it's exactly what he has been asking for.

I don't think she said anything about fiscal responsibility, rather the exact opposite. Rishi was pushing fiscal responsibility, Truss was pushing fiscal loosening and monetary tightening.

At the risk of dancing on a pin head, she was mainly arguing against "handouts" and it probably meets that definition. But that is largely semantics.

It's certainly not very free market if that's what you mean. But I suppose her argument would be that there isn't currently a free market in energy, it's a war situation, gas is being used as a weapon by Putin.

Still, I have no doubt that it won't be universally supported by free marketeers who generally support her. I shows she isn't overly idealistic, though, or less so than we'd presumed.

[jamesbrown]

Also, it goes way further than Labour had proposed, a bit like the earlier windfall tax. Starmer was talking about a 30bn intervention, this is more like 90bn. It's conceptually very similar, but I forget whether Starmer was talking about the wholesale gas price or just the retail price. I think it was just the latter, so no help for business, which was a major flaw in the Starmer plan (IIRC), but also made it a lot cheaper.

[DealorNoDeal]

£130bn according to this.
https://www.telegraph.co.uk/business...-bills-tax-gas

It should reduce inflation quite a lot too. (The 20%+ predictions for early next year assumed the October price cap increase and further hikes.)

[jamesbrown]

Right. I've seen various estimates and it will also depend on what happens to wholesale gas prices - it is basically a limitless promise, in principle, the spend increases as the wholesale price moves above the ceiling (which is something like £2,500 for the average household, as reported, plus the £400 rebate makes it roughly the current cap for now, but increasing over time). Also, there's various conflicting details about the funding etc. Either way, it's a massive intervention, bigger than furlough, bigger than what Labour proposed by far, bigger than most people had expected, most likely.

[mattster]

I think it's a good idea (I think) but totally at odds with everything she's been saying until now about fiscal responsibility. It's easy to look good now if you fix problems by borrowing vast sums without a plan to pay them back.

I wonder how Keir will find a way to criticise it since it's exactly what he has been asking for.

It'll certainly solve the problem in the short term, but the long term costs could be huge - and unknowable at this point in time, since prices could keep on going up. Also sounds as if it is going to lock in high prices for years if not decades, assuming we will be paying back via our bills. Not a solution targeted at the poorest, since we will all be benefiting - and larger users benefiting by more.

I think some sort of windfall tax, even if not for the entire amount, would be appropriate - the idea that we are borrowing in order to fund the profits of energy companies doesn't sit easily with me.

I do wonder what the right-wing press would be saying if this was Labour in power with a similar plan.Don't forgot that Truss has also backed herself into a corner on tax cuts as well, whih very well could be inflationary. Let's see if she tries to wriggle out of that one.

[jamesbrown]

assuming we will be paying back via our bills

That is not the plan (according to the vast majority of reports), rather via general taxation.

Also bear in mind that it reduces the need for a general windfall tax, since a lot of electricity is produced from gas. But, yes, gas suppliers will not have their profits capped, only those generating electricity from renewables etc. where the price will be uncoupled from gas (a good thing).

[NotAllThere]

It's very simple over here. We've been massively overcharged for years, so our increase will be about 15%.

I've turned our heating down from 22 to 20C. I may go another two degrees.