Last week, Liberal Democrat Leader, Ed Davey came up with a plan to freeze the unit price of gas and electricity paid by UK consumers, while Ex Prime Minister Gordon Brown promoted a plan to nationalise energy companies to lower unit prices. To be honest, I instantly dismissed Ed Davey’s plan as being too expensive, and I believe Gordon Brown’s plans would be too slow to deliver, in what is now, a dire emergency needing prompt action. I now read that the French Government have in place the “bouclier tarifaire” (tariff shield), which will freeze unit energy prices until the end of 2022 and will probably be extended to the end of 2023. The unit price of energy in France cannot rise above 4% under this legislation, but that will cost the French Government billions in losses at EDF, the nationalised energy generator.
Ed Davey is proposing a similar price freeze, which will see no further rises under the energy price cap. Of course, the energy sector is not nationalised in UK, so ED Davey’s proposal means paying private energy companies the difference between the current capped price (electricity 29p per KWh) and the new capped prices which will see a KW of electricity rise to 50p from October. There is no cap for business users, and literally, hundreds of thousands of small businesses will fail this Winter due to unaffordable energy prices. So, it is obvious that small businesses need help too. The UK Government is already providing assistance to big businesses who use large quantities of energy under its “Energy Intensive Industries Compensation Scheme”, this helps around 300 UK businesses employing around 60,000 people, but it does nothing for small business owners.
If the UK Government were to freeze the energy price cap now, effectively cancelling all further increases to domestic users, it would cost around £50 billion over the next twelve months. Introducing an energy price cap in the small business sector could cost a further £100 billion, but, this would be money well spent and would save hundreds of thousands of small businesses as well as relieving energy price rise worries for millions of people. A sure vote winner if ever I saw one. Sunak’s £400 per UK household paid to energy companies this Winter, will cost £10 billion and his windfall tax will raise just £5 billion. Payments to poorer folk through the benefits system and Council Tax refunds take the total package announced by Sunak, to a grand total of £37 billion. This is woefully inadequate when compared to France, where sixty five billion euros has already been allocated. France will also continue to spend more as this Cost of Living Crisis unfolds, so the UK has a lot of catching up to do.