TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'

MNI BRIEF: Canada NDP Will Bring Nonconfidence Motion In Jan.

CANADA NDP SAYS WILL INTRODUCE NONCONFIDENCE MOTION

MNI China Daily Summary: Friday, December 20

MNI: PBOC Net Drains CNY103.5 Bln via OMO Friday

MNI: PBOC Sets Yuan Parity Lower At 7.1901 Fri; -2.13% Y/Y

EZ/UK T-Bill Calendar: Greece to Sell Bills Monday

EZ/UK Bond Supply Calendar: BOE APF Sales Due 6 January

MNI: BELGIUM DEC BNB BUSINESS CONFIDENCE -13.8

MNI EXCLUSIVE: EU-Mercosur Deal Close, But Likely Short-Lived - Officials

AUSTRALIA: 2025 Election Outcome Looking More Uncertain According To Newspoll

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

How could the energy price guarantee be tweaked?

UK
  • There has been talk this morning of the government reversing some of the energy price guarantee. This is a very poorly targeted scheme and is applied universally.
  • For households, it has capped the unit prices of gas to 10.3p/hWh and 34.0p/kWh for electricity (as well as capping the standing charge). This had the effect of limiting the average energy bill to £2,500/year for households.
  • However as energy unit prices are capped, those who are the heaviest energy users are effectively receiving the largest subsidy. The heaviest energy users tend to be the wealthiest with the largest houses - those who don't necessarily need the help of government subsidies. This also makes the scheme far more expensive than it really needs to be.
  • Something that the government could do is to introduce different tiers for energy prices. For example, allowing the average (or double the average) amount of energy use to be capped at the unit prices outlined above, but then to use market prices for any usage above this.
  • This would probably be the simplest way to limit bills. Other alternatives could be to have more energy rebates for people on benefits or the elderly - but this would increase inflation (and could therefore risk more second round effects). Or to limit the scheme to those up to Council Tax Band D (but this would also mean inflation rose more than expected and would be more difficult to administer).
  • Whether we get any further clarity on this today - or will have to wait for 31 October remains to be seen.
HomepagePolitical RiskCommoditiesPolitical Risk BulletBulletMarketsFixed Income BulletsForeign Exchange Bullets

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.