The FT reports this morning that:
Households facing a “cost of living catastrophe”, including soaring gas and electricity charges, in April could yet be spared a £100 levy on their bills which had been intended to recoup the money to cover recent energy company failures. Ofgem, the energy regulator, is looking to spread the cost of the failed suppliers over time, according to people briefed on the situation.
There are a number of issues arising from this. The first is that the maths looks to be wrong. I understand that there are around 27 million domestic properties in the UK, although I am of course aware that some are in multiple occupation. Dividing the £1.8 billion cost of failed energy companies between those 27 million households would suggest an additional bill of £66 per household. Where the £100 charge comes from is, in that case, open to doubt.
However, what troubles me more is the principle of charging for that cost on what would appear to be the basis of a poll-tax arrangement. Poll taxes are, of course, those charged as a fixed sum on every liable person. They do not take into consideration capacity to pay. It is also possible that in this case they will not be proportional to use. The very obvious injustice of trying to recover the cost of failed energy companies in this way should be readily apparent.
Worse, though, is the premise that the cost of this failure should be paid through energy bills when it was not the fault of any consumer that their supplier failed. Those supply failures were the consequence of failed regulation which was in turm the consequence of a failed political objective to create a supposed market in consumer energy in the UK when it is very obvious that this should be under state monopoly control.
The price of failure should, in that case, fall across the body politic, and to general taxation. I am, of course, aware that we have little better than a flat tax across income bands in the UK, but even that delivers a little more social justice than the regressive imposition of a poll-tax on energy consumers might do.
There can be no doubt that we will face an energy price crisis in the UK in 2022. Making it worse by the imposition of anything that looks like a poll tax on consumers to pay for failed government policy, at whatever the chosen rate might be, would add insult to the injury already being imposed by speculative price increases from which energy companies will be profiting enormously.
This article first appeared in my blog, www.taxresearch.org.uk.
