Call for action to avert ‘national crisis’ as UK energy bill debt reaches record high – business live
Martin Lewis: government needs to act now to stop ‘national crisis on scale to pandemic’
Consumer champion Martin Lewis, founder of moneysavingexpert.com, is on the radio now.
He said for every £100 a month that people pay on direct debit for their energy bills now, that will go up to £181 probably at the end of August, before the new prime minister is in place, and rise again to £215 in January.
Sitting down with the energy companies is the right thing to do but ultimately it is government and government alone that can make the decision to stop the terrible cataclysmic risk millions of people in our nation face this winter and it needs to do it soon.
He said with the difference in the energy price cap likely to double between April and January, the chancellor should also double all the figures in his support package.
Liz Truss, the frontrunner to become prime minister, has pledged tax cuts, but Lewis said:
Tax cuts will not help the millions of the poorest in society tax cuts will not help the millions of the poorest in society who are making the choice between heating and eating. That just will not help them because they don’t pay tax.
Tax cuts are not going to help the poorest pensioners, it’s not going to help those on universal credit. The dropping the green levy is a sticking plaster on a gaping wound. It’s £150.
By the time we get to January, some people will see their bills go from £800 to £4,200 on the same use.
This is a national crisis on the scale we saw in the pandemic.
If it’s just tax cuts and the green levy, then we’re going to leave millions destitute and in danger this winter and that cannot happen in our country.
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The Don’t Pay UK campaign group, which is calling on people to stop paying their energy bills from 1 October, says it has attracted more than 97,000 supporters so far. It says it will only take action if one million people sign up.
However, charities have warned people of the serious consequences of not paying their bills.
Simon Clarke, chief secretary to the Treasury, has tweeted:
🧵A quick thread on supporting people with the cost of living:
1/4 Of course, the Government is working up a package of cost of living support that the next Prime Minister can consider when they take office.
— Simon Clarke MP (@SimonClarkeMP) August 10, 2022
2/4 It is absolutely right to consider these options in the round when the new Prime Minister has taken office – rather than announce new un-costed policies, without sight of all the details of the pressures people could face, during a leadership election.
— Simon Clarke MP (@SimonClarkeMP) August 10, 2022
3/4 Lowering the tax burden doesn’t only help struggling families with the cost of living – it also boosts economic growth and will help avoid a recession. And that’s why I back Liz’s plan to reverse Rishi’s NI rise and cut green levies on energy bills.
— Simon Clarke MP (@SimonClarkeMP) August 10, 2022
4/4 @trussliz has always said that she will look at what more needs to be done. I have no doubt she will do the responsible and honest thing by considering these proposals when in office: making decisions in light of all the facts and the options. That’s what leadership is about.
— Simon Clarke MP (@SimonClarkeMP) August 10, 2022
Truss refuses to rule out cash payments to help with energy bills
Liz Truss, the foreign secretary and frontrunner in the Tory leadership contest, has insisted that she is not ruling out giving cash payments to people struggling with their energy bills, reports Andrew Sparrow.
In a pooled broadcast interview, shown on Sky News, when she was asking what she would do on this issue, she restated her commitment to cutting the tax burden, by reversing the national insurance increase and removing the green levy from fuel bills, as a priority. But, when she was asked if that meant she was ruling out cash payments in any form (or targeted support, as it could be described), she replied:
That’s not what I said. What I said is my priority is making sure we’re not taking money off people and then giving it back to them later on. I believe in people keeping their own money and I believe in a low tax economy. That’s the way we’re going to drive growth.
I’m not going to announce the contents of a budget in the future at this stage in August, but I can assure people I will do all I can to make sure that energy is affordable, and that we get through this winter.
More on our UK politics live blog.
Rocketing inflation has caused a shortfall for UK government departments which need a £44bn cash boost to maintain public services such as the NHS and schools – or 40% of the planned funding increase will be wiped out, according to the Institute for Fiscal Studies.
The government will need to spend an extra £44bn over the next three years on public services to keep pace with rising inflation and avoid steep cuts.
In a review of the rising costs facing the public sector, the IFS said that without further funding, Whitehall budgets faced being overwhelmed by rising cost pressures that would force departments to cut staff and services.
The government said in its November spending review that it would increase departmental budgets by 3.3% on average above the then inflation rate. But with prices soaring since then, the tax and spending thinktank is forecasting the rise in budgets is now unlikely to be more than 1.9%.
Hungary’s MOL says oil flows viz Druzhba pipeline to resume ‘within days’
Oil prices have drifted lower again today. Brent crude is trading $1.22 lower at $95.08 a barrel while US light crude is down $1.18 at $89.33 a barrel.
Oil flows from Russia to central Europe via the Druzhba pipeline were suspended on 4 August after transit fee payments fell foul of sanctions against Moscow, but Hungarian energy group MOL said they could resume within days because it has transferred the transit fee for the use of the Ukrainian section of the pipeline.
The suspension drove oil prices higher yesterday. Hungary, which has been critical of EU sanctions against Moscow, said it was working on a solution. MOL said in a statement:
By assuming the fee, MOL could provide a swift solution to the issue: the Ukrainian party has pledged to resume the transport of crude oil within a matter of days, which has been halted a few days ago due to technical issues emerging on the banking front.
The suspension of pipeline flows had hit Hungary, Slovakia and the Czech Republic, whose ability to import alternative supplies by sea is limited.
Ministers will need to at least double the amount of support given last time to help protect the poorest households from rising energy bills, the consumer rights campaigner Martin Lewis said this morning.
In February, the then chancellor, Rishi Sunak, now vying for the Tory leadership, announced that eligible UK households would receive a £400 discount to help with energy bills from October, writes the Guardian’s Tobi Thomas.
Speaking on BBC Radio 4’s Today programme, Lewis said: “We’ve heard mutterings from the Rishi Sunak camp that he would increase the previous handouts that were given … but if he were to be consistent he would have to essentially double every number in that package.
“He will effectively need, if he wants to make this work, to double the numbers, especially for the poorest.”
The education secretary, James Cleverly, confirmed that crisis talks to “knock some heads together” would take place between energy sector bosses and the government this week.
The chancellor, Nadhim Zahawi, and the business secretary, Kwasi Kwarteng, will ask gas and electricity company executives to submit a breakdown of expected profits and payouts as well as investment plans for the next three years.
Lewis also criticised proposals from the other Tory leadership contender, Liz Truss, which focused on tax cuts as a way of helping the poorest households. Truss has appeared reluctant to offer further assistance for people to pay their energy bills aside from the tax cuts she has proposed, saying she does not favour “handouts”.
Ministers will need to at least double the amount of support given last time to help protect the poorest households from rising energy bills, the consumer rights campaigner Martin Lewis has said.
In February, the then chancellor, Rishi Sunak, now vying for the Tory leadership, announced that eligible UK households would receive a £400 discount to help with energy bills from October.
Speaking on BBC Radio 4’s Today programme, Lewis said: “We’ve heard mutterings from the Rishi Sunak camp that he would increase the previous handouts that were given … but if he were to be consistent he would have to essentially double every number in that package.
“He will effectively need, if he wants to make this work, to double the numbers, especially for the poorest.”
Energy bills are a “national crisis on the scale we saw in the pandemic”
Money Saving Expert’s @MartinSLewis has criticised both Liz Truss and Rishi Sunak, telling @Marthakearney their responses to the cost of living crisis “are going to leave millions destitute and in danger”. pic.twitter.com/ZPPPVjtsID
— BBC Radio 4 Today (@BBCr4today) August 10, 2022
The education secretary, James Cleverly, confirmed that crisis talks to “knock some heads together” would take place between energy sector bosses and the government this week.
The chancellor, Nadhim Zahawi, and the business secretary, Kwasi Kwarteng, will ask gas and electricity company executives to submit a breakdown of expected profits and payouts as well as investment plans for the next three years.
Lewis also criticised proposals from the other Tory leadership contender, Liz Truss, which focused on tax cuts as a way of helping the poorest households. Truss has appeared reluctant to offer further assistance for people to pay their energy bills aside from the tax cuts she has proposed, saying she does not favour “handouts”.
Workers walk out in ‘wildcat strike’ at Grangemouth oil refinery
More strikes – this time at an oil refinery run by the chemicals company Ineos, which could have an impact on UK fuel supplies.
Around a hundred workers at the Grangemouth oil refinery in central Scotland have walked out in a ‘wildcat strike’ over a pay dispute this morning, STV News is reporting.
Maintenance and repairs staff, who are members of the Engineering Construction Industry Association (ECIA) trade union, blocked a road outside the Ineos building which is used as access for tankers getting in and out of the site after they walked out in the face of the rising cost of living.
Last year, workers at the refinery agreed to a pay rise of 5% over two years. However, with inflation expected to rise above 13% in coming months, they want to reopen the agreement and negotiate a higher offer.
The strike means that maintenance at the refinery could be paused, with production of oil and gas across the country being impacted.
The Falkirk-based refinery is owned by Petroineos, formed in 2011 between the state-owned Chinese oil giant PetroChina and Ineos, part of billionaire Jim Ratcliffe’s petrochemical empire.
Speaking to STV News last week, one worker said: “This isn’t the path we wanted to go down but we feel like we have no choice now.”
An Ineos spokesperson at the Grangemouth site said in a statement emailed to the Guardian:
We can confirm that a number of contractors employed by third parties are taking unofficial industrial action at the Ineos Grangemouth site as part of a nationwide protest event.
Our manufacturing and fuel distribution operations are unaffected. The site has a very good working relationship with the contracting companies and their employees at Grangemouth, including those operating under the NAECI [National Agreement for the Engineering Construction Industry] agreement.
We are disappointed that the protesters have chosen to use the Ineos Grangemouth site as one of their backdrops for their unofficial action today.
The Liberal Democrat Leader Ed Davey has warned that tomorrow’s meeting between government ministers and energy companies risks becoming “a pointless talking shop” unless a tougher windfall tax is confirmed.
The Liberal Democrats have put forward plans for an expanded windfall tax that could raise around £20bn, four times more than the government’s weaker levy is currently expected to generate.
Davey said:
There is no time to waste in putting in place a tougher windfall tax, so we can raise extra cash and cancel October’s energy price rise.
The Conservative government’s windfall tax has been far too soft on the energy bosses who are making eye-watering profits from this crisis whilst the British public suffer.
This meeting cannot afford to be another pointless talking shop. Families and pensioners worrying about how to pay the bills this winter need a clear plan now.
On what must be done to protect consumers from falling into debt, Jayne Gardner, Partner at Shakespeare Martineau, a debt lawyer who works with energy providers, said:
There isn’t a magic “fix-all” which can be implemented to solve the surging energy prices and the rising cost of living – energy providers, with one arm tied behind their backs, are doing what they can to help customers. Ofgem have recognised that providers have little-to-no decision making power on the price of energy, with the huge increase in the wholesale costs of energy (as a result of the Ukraine crisis) that is driving the increase in bills.
For the most part, the ball is Ofgem’s court to implement changes for the benefit of both customers and providers. One positive regulatory change being considered is to update price caps quarterly in line with current wholesale energy costs – meaning that, if wholesale prices fall, caps will be downwards and therefore passing on price reductions benefit to customers more quickly than the current six months.
Ultimately though, what the sector needs is government intervention to reduce the wholesale price of gas and electricity. The coming year will be tough, and with the October cap rise, the situation for both providers and consumers alike is likely to get worse before it gets better.
While the Treasury’s Energy Bill Support Scheme granting £400 towards energy bills for all domestic electricity customers will score political points for the Government, many will be left scratching their heads wondering why those who are financially comfortable and able to pay their bills are granted the same support as those most vulnerable, where financial support will go the furthest.
Poorly insulated homes will pay £1,000 to £2,000 more this winter than better-rated homes, according to new analysis by the Energy and Climate Intelligence Unit, a non-profit group.
With the dual fuel price cap forecast to reach £3,958 this winter, the group found homes rated band F on the Energy Performance Certificate (EPC) system, a measure of the home’s efficiency, are set to have a gas bill £968 higher than a home rated band C, the government’s target for 2035.
The average home in the UK is rated band D and these homes will pay £420 more for their gas this winter, compared to a band C home.
Wholesale gas costs are set to have added around £2,500 to energy bills during the gas crisis. This includes electricity, as high wholesale gas prices have a knock-on effect in the power market as some electricity is still generated from gas, and the current market design means that has also sets the price for some other generators.
When gas and electricity bills are taken together, those living in the worst rated homes will pay almost £2,000 extra compared to EPC band C, and the average EPC band D homes will pay almost £600 extra.
Jess Ralston, senior analyst at ECIU said:
These stark differences between highly insulated and poorly insulated homes show the real-world impacts insulation could have in time to dent exorbitant bills this winter. The most vulnerable, such as the elderly, tend to live in colder homes and these are the groups that are being placed at risk by inaction from the government on energy efficiency.
The ECO insulation scheme has worked well and is knocking at least £600 a year off the bills of fuel poor households, but government is non-committal on doing more. We have to consider security of supply too, but more UK gas won’t come online anytime soon, so insulation is our best bet to shield us from the whims of Putin and lower bills during this cost of living crisis and each year after.
EDF sues French government over price cap
EDF is suing the French government for €8.3bn (£7bn) after the president, Emmanuel Macron, forced the nuclear energy firm to sell energy at a loss.
The French government extended a price cap in January to protect consumers and businesses from the rocketing cost of energy, forcing EDF to sell power below market prices.
The 84%-state-owned company has filed a compensation claim with the Conseil d’Etat, the French administrative supreme court, over “losses incurred” as a result of the price cap.
EDF, which is in the process of being fully nationalised, said it had lost €8.3bn to date and suggested the price cap could cost it €15bn over the full year.
In addition, EDF has had to power down some sites temporarily near the Rhône and Garonne rivers as heatwaves push up river temperatures, restricting its ability to use river water to cool the plants. Under French rules, the company can’t discharge water above certain temperatures back into the rivers because this could harm wildlife.
But at the start of this week, France’s nuclear power regulator extended temporary waivers allowing five power stations to continue discharging hot water into rivers. The ASN watchdog approved a government request for the waivers introduced in mid July to be prolonged at the Bugey, Saint Alban, Tricastin, Blayais and Golfech power plants.
Half of EDF’s 56 nuclear reactors have been offline due to planned maintenance and work to repair corrosion which was delayed by the pandemic, just as Europe faces an energy crunch following Russia’s invasion of Ukraine.
As a result of the maintenance work, the French nuclear giant estimates its power output this year will be the lowest in more than three decades. The company recently reported a first-half loss of €5.3bn.
E.ON slashes value of investment in Nord Stream 1
The energy network operator E.ON has slashed the value of its investment in the Nord Stream 1 gas pipeline by about €700m (£592m), as a result of “increased uncertainties” following Russia’s invasion of Ukraine, reports my colleague Joanna Partridge.
The German utility firm had said in March that its 15.5% stake – which E.ON holds indirectly via its pension fund – had a book value of €1.2bn, so its revaluation represents a 58% decline in value.
The company Nord Stream owns and operates two pipelines that each stretch 1,224km (761 miles), to bring natural gas from Russia to Germany.
Germany halted the certification process for the controversial Nord Stream 2 pipeline in late February, days before Russia’s full invasion of its neighbour, after Moscow granted recognition to the self-proclaimed republics of Luhansk and Donetsk in east Ukraine.
E.ON’s chief executive, Leonhard Birnbaum, said: “The current energy crisis finally makes clear that Europe needs to transform its energy system. To be independent of Russian gas. To ensure supply security.”
At the release of its last annual results in March, E.ON warned of the “valuation risks for investments”, including its stake in Nord Stream 1, which is majority-owned by Russian state energy firm Gazprom.
The flow of gas to Europe through Nord Stream 1 has reduced to about 20% of the pipeline’s usual capacity in recent weeks, half the amount that had been delivered since service resumed after maintenance work.
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