Energy price cap comes as fossil fuel companies report record earnings, while green spending becomes an afterthought
As Europe teeters on the edge of conflict, the cost of energy is increasingly high. With inflation on the rise, families will be squeezed across the board. Businesses and middle-class families will feel it too, but it is the poorest, as always, who will suffer most. And where is the money needed for a better future being spent?
Rishi Sunak’s (Chancellor of the Exchequer) announcement yesterday warned the British public that the cost-of-living crisis was going to worsen this year. The £9bn emergency package he proposed was called insufficient by critics, among which Groundwork UK said it was ‘deeply concerning for households that are already feeling the brunt of rising bills and the continuing financial effect of the pandemic.’
The announcement comes as the Bank of England forecast a slower GDP growth than previously anticipated, and inflation to be higher. Now Britain can expect to have the ‘worst rate of real income erosion since 1990.’
Ofgem (Office of Gas and Electricity Markets) announced:
‘The energy price cap will increase from 1 April for approximately 22 million customers. Those on default tariffs paying by direct debit will see an increase of £693 from £1,277 to £1,971 per year (difference due to rounding). Prepayment customers will see an increase of £708 from £1,309 to £2,017.’
Uncertainties and mismanagement
Behind this spike in prices is a global gas price increase that has been going on for months. The Russia-Ukraine dispute has also added to anxieties on this front, with financial markets, on the whole, being apprehensive early in the year.
That Russia is the largest supplier of gas to the European market means any disruption to that supply, which goes through Ukraine, may cause a ripple effect that further worsens the UK’s situation.
Regardless, the situation is already precarious. This is a crisis that will likely drag on for some time, and the public will also be forced to pay a hefty bill for the pandemic spending policies of the government.
These announcements come after a week in which billions (almost £9bn funnily enough) were written off that had been spent on PPE during the pandemic. This came with the admission by the Department of Health and Social Care (DHSC) ‘that a risk of fraud increased as contracts worth tens of millions were handed to companies placed on a VIP Lane.’
The price is right (for some)
Meanwhile, the fossil fuel giant Shell announced things were going well for them and their shareholders; ‘quadrupling its profits to historic highs,’ the company reported ‘better than expected profits of $6.4bn (£4.7bn) in the final quarter of last year compared with earnings of $393m a year earlier, driven by a surge in oil and gas prices.’
This prompted further calls for windfall taxes on North Sea oil and gas producers, although the chancellor seemed set against it; fossil fuel companies ‘will have breathed a sigh of relief to hear the chancellor’s defence of their unloved industry yesterday (Emily Gosden writes).’
Levelling up is missing the mark
The government’s levelling up strategy was criticised on a variety of fronts this week. For example, the plan was called insufficient to tackle health inequalities, that it lacked green investment focuses and failed to prioritise communities that have been historically underfunded:
‘Sajid Javid’s constituency, Bromsgrove in Worcestershire, will receive nearly £15m – £148 a head – despite being one of the wealthiest areas in England.’
‘In contrast, eight local authorities that are among the poorest in England have received less than £10 a head from the four funds announced to date.’
Not got a net zero clue
Investments in a green energy infrastructure not only work toward curtailing carbon emissions, creating new jobs in cleaner industries, they also reduce our reliance on the global insecurities of energy markets. For all the talk of investing in a green future and avoiding climate disaster, it does not look like the government is putting their money where their mouth is.
Instead, we see announcements of bleaker days to come: the residual effects of an overreliance on private business interests, and fossil fuel economies that have been long known to be harmful.
We hope the government will prioritise making homes better insulated, provide support for the poorest and invest in a renewable energy transition that is decisively planned.
Our role
We at Groundwork run the Green Doctor service, which aims to help those most vulnerable and at risk from suffering through the effects of fuel poverty. That job is going to become even more difficult, but certainly more vital.
Through it all, we will be here. Calling for change, working toward a sustainable future.
Matthew Thomas