Unemployment could certainly spike if businesses can’t afford to pay energy costs, it’s a vicious circle, need some smart bods on the case, the knock on effect is huge.
Windfall tax on all businesses making huge profits, higher tax for those top earners who have the broadest shoulders, increased tax on unearned income, increase tax thresholds which are ridiculously low, increase minimum wage as nobody working full time should be in the position of needing to claim benefit.
How the hell did you ever vote Tory?
The current marginal tax rate for top earners is 48.25% - I have no issue in raising that but it really doesn't solve the problem because the revenue generated would be a drop in the ocean and the law of diminishing returns kicks in - it's been tried before and tax revenue actually drops.
For windfall tax read increases in corporation tax rates (and dividend income should be taxed at the same rate as normal income) - no issues with that as long as it doesn't stifle investment. Increase capital gains tax - no issues with that at all.
A discussion for another day/place Bob but I don't think Laffer Curve economics is held in particularly high regard by the majority of modern economists. And certainty not the "trickle down" version that has never worked anywhere but still seems to have its fans both inside and outside government.
Apparently there is an article in The Telegraph which is behind a paywall but apparently it describes an average family which would have to be spending at least £31,200 a year on top of their accommodation expenses (mortgage/rent which doesn't attract VAT) in order to save £1,300 through a 5% cut in VAT. That is impossible for a huge number of families.
It is simple economics that if you can't afford to buy a product in the first place, you can't benefit from a VAT cut on that product.
Am sure there are lots of ways the govt perceive they can raise/save the funds or put money back in people's pockets to allow people to pay their fuel bills. But with the clock ticking I can't see any option other than reducing the cap for everyone. It'll ultimately be funded by those who can.
Not sure if this is the same across all providers but with British Gas the £400 of pledged winter help plays out as a £66 monthly refund back to your energy account. That's not much help if you don't have the extra £66 in the first place and get a red letter after month 1. Again, stop the hassle and admin that goes with nonsense like this, reduce the opportunities for people not being able to pay... and just directly reduce the cap.
Windfall tax on all businesses making huge profits, higher tax for those top earners who have the broadest shoulders, increased tax on unearned income, increase tax thresholds which are ridiculously low, increase minimum wage as nobody working full time should be in the position of needing to claim benefit.
How the hell did you ever vote Tory?
The current marginal tax rate for top earners is 48.25% - I have no issue in raising that but it really doesn't solve the problem because the revenue generated would be a drop in the ocean and the law of diminishing returns kicks in - it's been tried before and tax revenue actually drops.
For windfall tax read increases in corporation tax rates (and dividend income should be taxed at the same rate as normal income) - no issues with that as long as it doesn't stifle investment. Increase capital gains tax - no issues with that at all.
I can see now that the current economic system just isn't working, there are too many people making money at the expense of others. The bosses of companies who are paid huge salaries and bonuses whilst their employees struggle. Everyone deserves to be paid properly for their work and people should not have to rely on benefits to just about survive.
I owe @seth plum an apology as much of what he says is so true.
It may be late in life, but at least I recognise that the Tories are out for one thing only and that it to look after the wealthiest, they don't care about anything else. The system they have built up is broken and we need massive changes in this country, hopefully that will come at the next election.
I can recall ME14addick's posts when she supported the Conservatives so I think her change of position is a 100% genuine one and that is a credit to her IMO.
Being reported that Truss is seriously considering a 5% cut to VAT saving an average household £1300 per year. How is this £1300 going to make enough difference when if the cap is not frozen we’re currently looking at yearly energy costs of £6000 pa in the spring. It’s said this will cost £35 billion. Sounds like a cheap and insufficient intervention.
Why assume this is accurate and / or the only measure to be adopted? Too early to know what they will announce post the internal Tory vote.
It is inconceivable to me that the Treasury aren’t running the numbers on all sorts of variables and options for them to decide which is most likely to get support and get us through this period.
Being reported that Truss is seriously considering a 5% cut to VAT saving an average household £1300 per year. How is this £1300 going to make enough difference when if the cap is not frozen we’re currently looking at yearly energy costs of £6000 pa in the spring. It’s said this will cost £35 billion. Sounds like a cheap and insufficient intervention.
Why assume this is accurate and / or the only measure to be adopted? Too early to know what they will announce post the internal Tory vote.
It is inconceivable to me that the Treasury aren’t running the numbers on all sorts of variables and options for them to decide which is most likely to get support and get us through this period.
VAT is actually a regressive tax, meaning that the poor pay a higher proportion of it in terms of their income, at least, that is the argument I remember people criticising the government about in 2011 when they raised it to 20%. Although to be fair I am sure that they can do nothing right in many people's eyes. Too invested in disliking them.
Reducing VAT is a good thing to do to help the poorest. It isn't enough though. It also helps businesses, which is also good.
It will need to also be met with targeted support to those most in need with energy bills though.
Reducing VAT will not help the poorest, it will however help those who are able to afford 'luxuries' like eating out, entertainment, holidays and consumer goods, most of which are out of reach of the lowest paid.
Sorry, reducing VAT does help the poorest, they spend a higher proportion of both income, and disposable income on VAT than their richer equivalents.
If VAT was being increased, I am sure there would be plenty on here stating that point.
Don't just take it from me though, take it from a source that hopefully most of those with their usual axes to grind can listen to, the European Parliament.
I'm sorry, this is simple economics and to argue otherwise will be done purely from a position of either willing or unwilling ignorance. Take your pick.
While you are right about this, @Huskaris, proportion of income tells only half the story. To illustrate with a couple of examples, lets assume we have someone on minimum wage of approx 20K per year and someone else on 150K per year, neither of these figures being extreme in the earnings spectrum.
The 20K bod will have take home pay of £17,530. Assume they spend 8% of their net pay on VAT, thats £1402 per year. If VAT is reduced to 15% rate, that becomes £1,052, so they are now paying 6% of their net pay on VAT.
The 150K bod will have net pay of £89,304 and spend say 4% of that on VAT, being £3,572. If VAT is reduced to 15%, that becomes £2,679 so they are now spending 3% of their income on VAT. Thus the lower earner has benefitted by 2% and the higher earner by 1%. This supports Huskaris's point.
However, in absolute terms, the lower earner is £350 per year better off and the higher earner £893 per year better off. This does not seem to be a desirable outcome as the bulk of the VAT foregone by the government is in the hands of the higher earners, and a good chunk will likely just add to their retirement pots. Thus cutting VAT is expensive and imprecise.
(My examples of Vat spend %s may be way off reality, but I think the point is illustrated nonetheless)
Finding a solution is an interesting problem. How about keeping the domestic energy cap as it is up to a certain amount of usage? Once you go above an amount assessed to be reasonably adequate for moderate domestic use then a higher tariff kicks in. If you want to heat your swimming pool, pay more for it. Surely not beyond the wit of power distributors to manage this through their billing systems. The amount needed to make them good between market price and the capped element to come from windfall tax on the extractors.
I'd also introduce a business cap to reduce insolvencies, but I dont know enough about that to propose a solution, other than to perhaps base it on a factor of the previous year's use. And I've had an afternoon pint so not at my sharpest.
And if you find errors in the example above, please shout. It's been a busy day so far.
VAT is actually a regressive tax, meaning that the poor pay a higher proportion of it in terms of their income, at least, that is the argument I remember people criticising the government about in 2011 when they raised it to 20%. Although to be fair I am sure that they can do nothing right in many people's eyes. Too invested in disliking them.
Reducing VAT is a good thing to do to help the poorest. It isn't enough though. It also helps businesses, which is also good.
It will need to also be met with targeted support to those most in need with energy bills though.
Reducing VAT will not help the poorest, it will however help those who are able to afford 'luxuries' like eating out, entertainment, holidays and consumer goods, most of which are out of reach of the lowest paid.
Sorry, reducing VAT does help the poorest, they spend a higher proportion of both income, and disposable income on VAT than their richer equivalents.
If VAT was being increased, I am sure there would be plenty on here stating that point.
Don't just take it from me though, take it from a source that hopefully most of those with their usual axes to grind can listen to, the European Parliament.
I'm sorry, this is simple economics and to argue otherwise will be done purely from a position of either willing or unwilling ignorance. Take your pick.
While you are right about this, @Huskaris, proportion of income tells only half the story. To illustrate with a couple of examples, lets assume we have someone on minimum wage of approx 20K per year and someone else on 150K per year, neither of these figures being extreme in the earnings spectrum.
The 20K bod will have take home pay of £17,530. Assume they spend 8% of their net pay on VAT, thats £1402 per year. If VAT is reduced to 15% rate, that becomes £1,052, so they are now paying 6% of their net pay on VAT.
The 150K bod will have net pay of £89,304 and spend say 4% of that on VAT, being £3,572. If VAT is reduced to 15%, that becomes £2,679 so they are now spending 3% of their income on VAT. Thus the lower earner has benefitted by 2% and the higher earner by 1%. This supports Huskaris's point.
However, in absolute terms, the lower earner is £350 per year bertter off and the higher earner £893 per year better off. This does not seem to be a desirable outcome as the bulk of the VAT foregone by the government is in the hands of the higher earners, and a good chunk will likely just add to their retirement pots. Thus cutting VAT is expensive and imprecise.
(My examples of Vat spend %s may be way off reality, but I think the point is illustrated nonetheless)
Finding a solution is an interesting problem. How about keeping the domestic energy cap as it is up to a certain amount of usage? Once you go above an amount assessed to be reasonably adequate for moderate domestic use then a higher tariff kicks in. If you want to heat your swimming pool, pay more for it. Surely not beyond the wit of power distributors to manage this through their billing systems. The amount needed to make them good between market price and the capped element to come from windfall tax on the extractors.
I'd also introduce a business cap to reduce insolvencies, but I dont know enough about that to propose a solution, other than to perhaps base it on a factor of the previous year's use. And I've had an afternoon pint so not at my sharpest.
And if you find errors in the example above, please shout. It's been a busy day so far.
That seems like an idea with exceptions for any medical equipment.
The suppliers then have to prove to the government how much they have lost (not how much they have had their profits reduced by) which the government will compensate. Pay for it, or most of it, by a windfall tax on the "manufactors" BP and Shell etc.
Being reported that Truss is seriously considering a 5% cut to VAT saving an average household £1300 per year. How is this £1300 going to make enough difference when if the cap is not frozen we’re currently looking at yearly energy costs of £6000 pa in the spring. It’s said this will cost £35 billion. Sounds like a cheap and insufficient intervention.
Why assume this is accurate and / or the only measure to be adopted? Too early to know what they will announce post the internal Tory vote.
It is inconceivable to me that the Treasury aren’t running the numbers on all sorts of variables and options for them to decide which is most likely to get support and get us through this period.
No more handouts said our new PM
So? That’s not the same as not looking at multiple options. I think she actually said favoured tax cuts above handouts. Doesn’t mean the cap might be challenged for example.
My point is wait and see. A week is a long time in politics and positions change.
Regardless it will be seen as insufficient whatever it ends up being as there doesn’t appear to be a simple and affordable solution. We can only hope for fair and proportional.
Is there anything to stop the government taking over one that has gone bust in the same way as we bailed out the banks and use that as a low cost supplier to the people that are going to struggle the most ?
The reported policies will have a negative effect on Tory voters so I can't see them unless Truss is a complete fool which she may well be. If you are going to let the price cap rise as it is, you will need to up benefits for the poor. When you up them, it is hard to cut them as was seen in relation to covid.
That means a lot of middle income households, quite a few would have voted Tory at the last election will be well out of pocket. I can't see a policy happening which will alienate many of your own supporters. Mind you Truss may well be a complete fool. The jury has to be out on that one.
Is there anything to stop the government taking over one that has gone bust in the same way as we bailed out the banks and use that as a low cost supplier to the people that are going to struggle the most ?
It’s not the suppliers making big profit. It’s the likes of BP and Shell who mine the raw material.
The way forward is most likely cap / reduce the cost to users and subsidies the suppliers.
Is there anything to stop the government taking over one that has gone bust in the same way as we bailed out the banks and use that as a low cost supplier to the people that are going to struggle the most ?
It’s not the suppliers making big profit. It’s the likes of BP and Shell who mine the raw material.
The way forward is most likely cap / reduce the cost to users and subsidies the suppliers.
Although I completely agree with the concept, I think (from my understanding) that the profits for the suppliers are more or less a fixed percentage.
If the price of energy goes up 4x, their profits also go up 4x.
They are part of what needs a windfall tax.
Profit is the greatest motivator the world knows, and is to be celebrated, but profit must be earned, not purely circumstantial.
I'll be interested to see what actually happens, but I am sure that more will happen, because the Tories' core vote are one of the main groups of people who will be squeezed.
They will do a lot more than what is currently being discussed, although don't get me wrong, it is fun watching people declare that nothing will happen in order to solidify their own views.
The reported policies will have a negative effect on Tory voters so I can't see them unless Truss is a complete fool which she may well be. If you are going to let the price cap rise as it is, you will need to up benefits for the poor. When you up them, it is hard to cut them as was seen in relation to covid.
That means a lot of middle income households, quite a few would have voted Tory at the last election will be well out of pocket. I can't see a policy happening which will alienate many of your own supporters. Mind you Truss may well be a complete fool. The jury has to be out on that one.
Her latest ultimatum to the EU re the NI protocol, suggests that she is happy for there to be a trade war with the EU which would only make the costs of living crisis even worse, so she does appear to be a complete fool. The last thing we need is a trade war which might make some goods even more scarce, thereby driving up prices even more.
It does worry me as it is the last thing our country needs. I don't like Sunak but he is no fool. Looks like it is definitely going to be Truss though which not only could be bad for the Tories but sadly worse for the country.
Is there anything to stop the government taking over one that has gone bust in the same way as we bailed out the banks and use that as a low cost supplier to the people that are going to struggle the most ?
It’s not the suppliers making big profit. It’s the likes of BP and Shell who mine the raw material.
The way forward is most likely cap / reduce the cost to users and subsidies the suppliers.
Although I completely agree with the concept, I think (from my understanding) that the profits for the suppliers are more or less a fixed percentage.
If the price of energy goes up 4x, their profits also go up 4x.
They are part of what needs a windfall tax.
Profit is the greatest motivator the world knows, and is to be celebrated, but profit must be earned, not purely circumstantial.
I'll be interested to see what actually happens, but I am sure that more will happen, because the Tories' core vote are one of the main groups of people who will be squeezed.
They will do a lot more than what is currently being discussed, although don't get me wrong, it is fun watching people declare that nothing will happen in order to solidify their own views.
There is a profit margin and a standing charge built into the cap. But they are a % of the total bill, as unit prices increase so do they, obviously.
One way to bring bulls down would be to revert those back to 2021 levels. At this stage it would be no where near enough.
We have seen an increase here but so far not much. Best wishes for this challenging time everyone.
A very good article which explains the current situation and shows why we are faring so much worse even though we don't rely on gas from Russia. Liz Truss was part of the Cabinet that sanctioned the selling off of our gas storage facilities, because they wouldn't spend the money on upgrading and repairing them. Now they are having to spend more money to increase our storage capability.
I hope the new PM doesn't use the Council Tax route to get help, because it bears no resemblance to a household's income therefore their ability to pay.
I live in a rented 2 bedroom bungalow which is a Band E, so didn't qualify for the £150 earlier this year. I have been looking at 2 bedroom bungalows in the north to get an idea of what we may be able to afford when I retire, because it certainly won't be in the south, as rents are so high; most I have looked at are in much lower bands.
I am working through a BBC series by Adam Fleming about the current Prime Minister Boris Johnson. It is a good insight. One bit that indicated to me how the privileged ruling class, that every Tory voter empowered, think was about Boris Johnson at Balliol College Oxford. He would deliberately seek out lonely ‘plain’ rather overweight women at the University, work his ‘charm’ and ‘charisma’ on them so they would become his loyal drones working unrewarded on his campaigns to become president of the Oxford Union and anything else. Then they were ghosted. This is the person who led the campaign to leave the EU, which is demonstrably a disaster, and won the 2019 election. His is the Tory mindset, and to me the mindset of Tory voters. Anybody know how to bring the country together?
I am working through a BBC series by Adam Fleming about the current Prime Minister Boris Johnson. It is a good insight. One bit that indicated to me how the privileged ruling class, that every Tory voter empowered, think was about Boris Johnson at Balliol College Oxford. He would deliberately seek out lonely ‘plain’ rather overweight women at the University, work his ‘charm’ and ‘charisma’ on them so they would become his loyal drones working unrewarded on his campaigns to become president of the Oxford Union and anything else. Then they were ghosted. This is the person who led the campaign to leave the EU, which is demonstrably a disaster, and won the 2019 election. His is the Tory mindset, and to me the mindset of Tory voters. Anybody know how to bring the country together?
Fire remainers out of a cannon. That is the Tory mindset that won the 2019 election.
Alternatively, boring those that disagree with you to death with attention seeking rhetorical diatribes, which seems to be your favoured approach, might reap rewards.
PWR Wholesale gas prices have increased by about 90%, however the cost of producing that gas hasn't risen by much so why has the price increased by so much - OK I know market forces but why should the producing companies be allowed to increase the prices by so much - it is immoral, or have I got this wrong?
Being reported that Truss is seriously considering a 5% cut to VAT saving an average household £1300 per year. How is this £1300 going to make enough difference when if the cap is not frozen we’re currently looking at yearly energy costs of £6000 pa in the spring. It’s said this will cost £35 billion. Sounds like a cheap and insufficient intervention.
Why assume this is accurate and / or the only measure to be adopted? Too early to know what they will announce post the internal Tory vote.
It is inconceivable to me that the Treasury aren’t running the numbers on all sorts of variables and options for them to decide which is most likely to get support and get us through this period.
It’s because it was in The Sunday Telegraph which is the Tories go to paper for floating / leaking policy. As for it being the only intervention. It can’t be because it’s basically useless. The Treasury might well be running all sorts of numbers but it’s going to be Truss that dictates what policies go forward. Most of what she’s proposed has had economists running for cover including the until very recent chancellor and lauded Rishi Sunak.
Comments
It is simple economics that if you can't afford to buy a product in the first place, you can't benefit from a VAT cut on that product.
Not sure if this is the same across all providers but with British Gas the £400 of pledged winter help plays out as a £66 monthly refund back to your energy account. That's not much help if you don't have the extra £66 in the first place and get a red letter after month 1. Again, stop the hassle and admin that goes with nonsense like this, reduce the opportunities for people not being able to pay... and just directly reduce the cap.
I owe @seth plum an apology as much of what he says is so true.
It may be late in life, but at least I recognise that the Tories are out for one thing only and that it to look after the wealthiest, they don't care about anything else. The system they have built up is broken and we need massive changes in this country, hopefully that will come at the next election.
https://www.theguardian.com/commentisfree/2022/jan/11/energy-price-crisis-tory-britain-ed-miliband
https://amp.cnn.com/cnn/2022/08/19/energy/energy-prices-uk-europe-explainer/index.html#amp_tf=From %1$s&aoh=16616956117505&csi=1&referrer=https://www.google.com
We have seen an increase here but so far not much. Best wishes for this challenging time everyone.
The suppliers then have to prove to the government how much they have lost (not how much they have had their profits reduced by) which the government will compensate. Pay for it, or most of it, by a windfall tax on the "manufactors" BP and Shell etc.
The cost of producing it hasn't gone up.
That means a lot of middle income households, quite a few would have voted Tory at the last election will be well out of pocket. I can't see a policy happening which will alienate many of your own supporters. Mind you Truss may well be a complete fool. The jury has to be out on that one.
If the price of energy goes up 4x, their profits also go up 4x.
They are part of what needs a windfall tax.
Profit is the greatest motivator the world knows, and is to be celebrated, but profit must be earned, not purely circumstantial.
I'll be interested to see what actually happens, but I am sure that more will happen, because the Tories' core vote are one of the main groups of people who will be squeezed.
They will do a lot more than what is currently being discussed, although don't get me wrong, it is fun watching people declare that nothing will happen in order to solidify their own views.
One way to bring bulls down would be to revert those back to 2021 levels. At this stage it would be no where near enough.
I live in a rented 2 bedroom bungalow which is a Band E, so didn't qualify for the £150 earlier this year. I have been looking at 2 bedroom bungalows in the north to get an idea of what we may be able to afford when I retire, because it certainly won't be in the south, as rents are so high; most I have looked at are in much lower bands.
It is a good insight.
One bit that indicated to me how the privileged ruling class, that every Tory voter empowered, think was about Boris Johnson at Balliol College Oxford. He would deliberately seek out lonely ‘plain’ rather overweight women at the University, work his ‘charm’ and ‘charisma’ on them so they would become his loyal drones working unrewarded on his campaigns to become president of the Oxford Union and anything else.
Then they were ghosted.
This is the person who led the campaign to leave the EU, which is demonstrably a disaster, and won the 2019 election.
His is the Tory mindset, and to me the mindset of Tory voters.
Anybody know how to bring the country together?
Alternatively, boring those that disagree with you to death with attention seeking rhetorical diatribes, which seems to be your favoured approach, might reap rewards.
Law of averages suggests hatred will eventually triumph?
Wholesale gas prices have increased by about 90%, however the cost of producing that gas hasn't risen by much so why has the price increased by so much - OK I know market forces but why should the producing companies be allowed to increase the prices by so much - it is immoral, or have I got this wrong?