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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 who have to choose between heating and eating, because they are not paying 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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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.
Here’s our full story on the meeting between the chancellor and business secretary and energy company bosses tomorrow to discuss measures to tackle the rocketing cost of living. Annual energy bills are forecast to rise above £4,000 in January.
The tax cuts proposed by Liz Truss, the favourite contender to become the new prime minister, are not enough and without more support measures could “leave millions destitute and in danger this winter,” consumer champion Martin Lewis warned this morning.
A Treasury source told the Sun, which first reported news of the meeting: “If you look back at what these firms were projected to make and what they actually brought in, it was beyond their wildest expectations. We are looking at options to go further and faster on those profits.”
The government has also floated the idea of extending the tax to electricity generators, although Boris Johnson later rejected the proposal.
Lord Howard, former Conservative party leader, was also speaking on BBC Radio 4’s Today programme.
“I really do agree with Dominic Raab that the method that Liz Truss is proposing would be suicidal”
Lord Howard, former Tory party leader, says his favoured candidate Rishi Sunak has the experience needed to address the cost of living crisis#R4Today pic.twitter.com/TBK6DGHVky
— BBC Radio 4 Today (@BBCr4today) August 10, 2022
And here is the full interview with Octopus Energy boss Greg Jackson, who called on the government to double support measures aimed at helping people with rocketing energy bills.
But last night, Liz Truss said she rejects the “Gordon Brown economics” of helping people directly with bills as her rival, Rishi Sunak, warned the British people “will not forgive us” if vulnerable households do not get extra help this winter, writes our chief political correspondent Jessica Elgot.
At the latest Conservative hustings, the former chancellor said he would not be prepared to spend sums similar to the help offered earlier this year, and that support should be more targeted. He said: “I don’t think that will be necessary because what we are talking about now … is the extra increase on top of what we thought.
“It’s right that we target that on the people who most need our help.”
He also admitted that despite his 5p cut to fuel duty, people were “not feeling it at the pumps” and said further help was going to be needed for the most vulnerable.
Speaking at the hustings in Darlington, which was dominated by questions on rising energy bills, Truss said she did not believe in using further taxation to boost government help.
“The first thing we should do as Conservatives is help people have more of their own money. What I don’t support is taking money off people in tax and then giving it back to them in handouts. That to me is Gordon Brown economics.”
But Cleverly didn’t offer details of what the government might do to help households with rocketing energy bills.
Boris Johnson waded into the Tory leadership row over energy costs last night by declaring he was “absolutely certain” his successor will offer further help to households, as average annual bills are now forecast to top £4,200 by January, write the Guardian’s Rowena Mason and Alex Lawson.
Johnson made an unexpected intervention on energy bills at a No 10 reception, as Liz Truss, the frontrunner to be the next prime minister, was accused by Rishi Sunak’s campaign of being “divorced from reality” over her refusal to commit to more handouts.
Johnson has repeatedly refused to act on rocketing gas and electricity bills before leaving office on 5 September, but said he was sure the next prime minister “will be wanting to make some more announcements in September/October about what we’re going to do further to help people in the next period in December/January”.
He added: “I just want you to know that I’m absolutely confident that we will have the fiscal firepower and the headroom to continue to look after people as we’ve done throughout.”
UK ministers to meet energy firms on Thursday
Government ministers are to meet energy companies on Thursday as the Treasury considers toughening the 25% levy on the profits of North Sea oil and gas operators announced in May.
Chancellor Nadhim Zahawi and business secretary Kwasi Kwarteng will meet energy bosses to discuss soaring energy bills for households, at a time when oil and gas companies are raking in billions of pounds in profits.
Education secretary James Cleverly, an ally of Liz Truss, told ITV’s Good Morning Britain that the chancellor and business secretary were “calling in” the leaders of the big energy companies to “knock some heads together” and “hold them to account about what they’re going to do with those profits”.
What we need to do is make sure that we have a short, medium and long term plan, so the chancellor and the business secretary are getting those energy companies in as part of the short-term response.
Households face average energy bills of more than £4,000 bills a year from January.
Speaking on BBC radio 4’s Today programme, Cleverly said in the short term, a “targeted support package for people that need help the most” is needed.
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 who have to choose between heating and eating, because they are not paying 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.
Octopus CEO calls on government to double support
Greg Jackson, the founder and chief executive of Octopus Energy, said the government needs to improve its offer of a £400 discount to households, a package that cost £16bn.
He told Radio 4’s Today programme:
If the £16bn package was right previously then clearly it’s not sufficient now and we need to look at a similarly significant assistance from the government for this winter.
Question: Do you think the government is on it right now?
Clearly we’re in a state of flux with the government and this needs to be the absolute top item in the intray of an incoming prime minister.
Tackling energy bills is critical to ensure people can get through this winter.
It’s counter inflationary if it’s done right.
Question: How is it counter inflationary?
If support is given on the bills through wholesale market mechanisms, then energy makes less of a contribution to inflation and that is obviously doubly beneficial. It’s going to help people through the winter when we need it and it’s going to help tackle inflation.
In an ordinary year, the energy company might spend £1.5bn on the energy it buys to supply its customers, he said. At current prices, it’s more like £9bn. “There is no company that can tackle this problem alone.”
The increases are going to be unmanageable for so many without the right support from the government and it’s beyond what any one company can do.
Utilita boss calls for social tariff to help the poorest
Derek Lickorish, chairman of the energy supplier Utilita Energy and former chair of the government’s committee on fuel poverty, is calling for a “social tariff” funded by the Treasury to help the poorest in society. Speaking on the Today programme, he said:
The situation is absolutely dire and I am astonished that we don’t see the two political contenders for prime minister declare a unity of purpose over this issue along with the current prime minister and start sorting it out. We have to do something very profound, we have to do it quickly because all the time we’re sitting here the clock is ticking and the price of gas keeps on increasing.
When Rishi Sunak announced the last package of measures to help, the closing price of gas on 26 May was 237p a therm. The day before yesterday the price of gas closed on the market at 463p a therm. That’s gone up 90%.
The time has come to put in place a social tariff to help the poorest in society and get on with it. And if we were to get on with it now we could have it in place by 1 January and we need dramatically the help that customers need for this winter and that looks like another £800 to £1,000 and then actually fix the problem for the fuel poor and vulnerable which looks to be 10m households.
It has to be a properly funded social tariff by the Treasury. That will cause more borrowing but is essential if we are to take the stress out of it for the poorest.
Liz Truss is talking about tax cuts, but Lickorish said the 4.5m of the poorest households who earn less than £12,500 a year don’t pay any tax so would not benefit, nor would those on benefits.
Emma from Kent was on BBC radio 4’s Today programme, talking about how she’d been trying to clear her energy debt and saying that things would become “unbearable for so many families”.
As much as I’ve paid off a fair amount so far, I’m not going to be able to clear the outstanding amount before winter comes. With the energy prices going up in October and then even more so in January this winter is going to be tough.
I was working towards a better future and hopefully not repeating the Christmases we’ve had for the past two years. Last Christmas we were averaging a food shop once every 10 weeks if we could… I was hoping that with us both working full-time we wouldn’t have to go back to a food bank. I guess never say never. It’s going to be unbearable for so many families and to be honest I’m dreading it.
UK households’ energy debt at record high even before bill rises
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
UK households owe £1.3bn to their energy suppliers, two months before bills are set to soar by more than 80%.
The overall debt bill is already three times higher than it was a year ago, experts at Uswitch said today, and it seems likely it will grow further over the winter.
Six million homes across the UK owe an average of £206 to their energy provider, according to the uSwitch report. In April the same average debt was £188.
Normally at this time of year people build up credit to help even out heating bills during the winter months.
Th energy regulator Ofgem is expected to hike the price cap on energy bills to £3,582 a year for the average household from October, according to a new forecast. Analysts at Cornwall Insight predicted further rises, to £4,266 in January and then £4,427 from the start of April.
Justina Miltienyte, head of policy at uSwitch, said:
Energy debt has hit an all-time high with the worst possible timing, turning this winter’s energy price hike into a deeply precarious situation for many households.
This is an alarming situation, as summer is traditionally a time when households are using less power for heating, which helps bill payers to build up energy credit ahead of the winter.
Markets are waiting for the latest US inflation figures for July, out at lunchtime. We are expecting inflation to ease to 8.7% from 9.1%, largely due to recent sharp falls in gasoline and other energy prices.
However the bigger concern is around core prices, which exclude volatile items like food and energy and are expected to rise at an annual rate of 6.1%, up from 5.9%.
In Germany, final figures show that inflation eased to 7.5% in July from 7.6% in June, but remained high.
The €9 rail ticket offered for unlimited travel and the fuel discount had a downward effect on the rate, as did the removal of the EEG renewables surcharge in July, said Destatis, the German statistics office.
In China, consumer price inflation is rising at the fastest rate since July 2020, at an annual pace of 2.7% last month, pushed up by higher pork prices. Food prices rose 6.3% compared with a 2.9% uptick in June. Pork prices jumped 20.2%, reversing a 6% decline in June as production slowed.
Factory gate prices eased to a 17-month low, however, despite global cost pressures, as slower domestic construction weighed on demand for raw materials. China’s producer price index rose 4.2% year-on-year, down from 6.1% in June, according to the National Bureau of Statistics.
Producer prices fell 1.3% in July from June, the first monthly drop since January, with the biggest falls in the price of metals and petrochemicals.
This is giving Chinese policymakers room to stimulate the flagging economy, in stark contrast to central banks elsewhere that are scrambling to rein in rampant inflation with aggressive interest rate hikes even as recession looms.
The Agenda
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9am BST: Italy inflation for July final (forecast: 7.9%)
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1.30pm BST: US Inflation for July (forecast: 8.7%, previous: 9.1%)
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5pm BST: Russia inflation for July (forecast: 15.3%)
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