Why social energy tariffs are finally gaining traction
That some Britons have been forced into a position of making the impossible choice of whether to heat or eat is unconscionable. For some disabled people, it’s even worse. It’s heat or ventilate, a point I first raised back in August.
Last week, there was a brief chink of light when a coalition of charities fronted by Scope, Age UK, National Energy Action and
Fair by Design, which campaigns to end the poverty premium, floated the idea of a discounted tariff targeted at those in greatest need. Remarkably, in a country where good ideas tend to get strangled by the thick forest of weeds growing around government, this seems to be getting some real traction.
Jonathan Brearly, the CEO of regulator Ofgem, told Institute for Government: “We are calling for a serious assessment of a social tariff. If it can be made to work, this could tackle the root cause of this issue and the distress that many customers are in this winter.”
Reports have indicated ministers have also been kicking the idea around. Brearly’s speech could be taken as a sign that it is finding favour where it matters. All this follows a weekend during which the issue of unaffordable bills, and the problems they are creating, blew up once again.
Business secretary Grant Shapps wrote a letter to suppliers demanding that they stop the practice of forcing struggling customers onto prepayment meters, a growing problem at a time of sky high bills even allowing for the ceiling the government’s energy support package created. It’s a bit rich for Shapps to be playing the role of doughty defender of the cashstrapped consumer; that the UK energy market has been dysfunctional for years has been clear to anyone paying attention.
The government has mostly sat on its hands, moving itself to pinch the odd idea from Labour when the polls suggest an advantage. Ofgem’s price cap is the Tories’ take on a 2015 election pledge by Labour’s Ed Milliband, which David Cameron referred to as “Marxist” among other things.
The Tory version worked for a bit, protecting consumers from the worst excesses of the energy industry while still allowing space for sharp consumers to find better through price comparison websites and what have you. Then wholesale energy prices, to which the UK consumer was over-exposed, shot through the roof.
Heat or eat, or even worse, heat or eat or ventilate, is the end result of that. These things always hit the most vulnerable the hardest. The social tariff could go some way towards solving that impossible dilemma.
A version of it actually once trialled in Britain, through a 2008 voluntary agreement between the government and the “big six” firms. However, the operation was messy, the eligibility criteria were all over the place, and it was ultimately replaced by the warm homes discount aimed at pensioners and those on low incomes. It provides a £150 rebate to eligible low-income consumers and pensioners. You can file it under “drop in the ocean” given what prices are now.
There have been additional payments offered to help with the current imbroglio, but they are clearly insufficient. If they were doing the job we wouldn’t be talking about people getting forced onto prepayment meters through being unable to pay their bills.
So how would a social tariff be paid for? The warm homes discount is funded by energy providers – that means when the market is functioning normally those costs should be passed on via slightly higher prices to those who can afford to pay. That would be a good way to fund an expanded social tariff.
The problem with the government’s energy price support scheme, which places a cap on the unit price of energy that we all pay, is it disproportionately benefits the wealthy. Heavy users in big houses; CEOs and premiership footballers, invariably do the best out of it.
Even a stopped clock tells the right time twice a day and the announcement of the scheme was one of those moments for the Institute for Economics Affairs, Liz Truss’s favourite think tank, which sniped at it as “middle-class welfare”. Welfare that did nothing to really encourage people to use less energy.
A social tariff funded through higher bills for more fortunate consumers who’ve benefitted from a bumper subsidy would go some way towards redressing the balance. The chief problem with it is that people are already talking about the need for “deep consultation” before such a plan could be brought forward. In
In the meantime, households are still facing impossible energy dilemmas. You can see why Shapps’s solution has its attractions: it’s a cheap way to win him some favourable publicity. But all that hot air isn’t going to keep homes warm. More is required, Mr Shapps.
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