Earlier today we highlighted the impact of high energy costs on schools. And now Ed Davey has turned his attention to the commercial sector – retail and hospitality in particular.
He is calling on the new Prime Minister to set up an emergency support scheme for 1.4 million small businesses akin to those that appeared during lockdown. As we mentioned before, the energy price cap only applies to domestic households, so businesses could find their costs rising by 400%.
His proposal would offer grants of up to £50k to shops, pubs, restaurants and all small businesses to help them cope with huge energy bills. The grants would cover 80% of the increase in energy bills for one year, up to the maximum of £50k.
The cost of the scheme is estimated to be around £10 billion, and this could be covered by reversing the planned tax cuts for big banks. In detail, we are told that would include cancelling the Government’s cut to the Bank Surcharge that is due to take effect in April 2023 and restoring the Bank Levy to 2015 levels, raising £10.6 billion over the next four years.
Ed said:
Our treasured high streets risk being turned into ghost towns and small businesses across the country risk being devastated by sky-rocketing energy bills, but Conservative ministers don’t seem to get it or care.
Local shops, pubs and restaurants could all close their doors for the last time over the coming months unless the government steps up urgently.
We need an energy bailout now to save the high street, rescue small businesses and keep prices down for families. This could be funded by reversing the Conservatives’ tax cuts for the big banks, and focusing on saving our struggling small businesses instead.
There is no time to waste. The new Conservative Prime Minister must bring in legislation to protect families and businesses from soaring energy bills as soon as Parliament returns on Monday.
Makes sense. But will the new Prime Minister have the courage to do it?
* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.
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7 Comments
The trouble with all these financial ideas to fix the energy crisis is that it’s caused by a shortage of supply, so the price goes up until demand matches. Energy is in inelastic demand – the price has to rise a lot to reduce demand a little – so we are where we are. Providing more money to various groups stops the demand from them dropping, so it has to drop somewhere else. A grown up conversation about where we could cut energy demand for least impact would be good. I’d go for aviation.
Another point is that the way the energy market is set up is bonkers. It doesn’t cost any more now than it did 2 years ago to generate a kW of electricity from nuclear or wind. In any case they are mostly on fixed price “contracts for difference” And N. Sea gas still costs the same to produce too. So why does everyone have to pay top dollar for the marginal unit of gas? Bonkers.
“The trouble with all these financial ideas to fix the energy crisis is that it’s caused by a shortage of supply, so the price goes up until demand matches.”
Indeed – which is why the focus – at least in part – should be on using less energy.
Better insulation – especially not letting builders get away with skimping on new builds.
Very true nonconformist. Better insulation has always been the cheapest way to reduce energy bills. It’s also fair to say that a lot of new builds are not built as designed. I expect it’s always been the case, but the increasingly lax approach to building control means that developers know they can get away with falling well below the agreed standard.
There’s been far too much kicking the can down the road when it comes to improving the required of energy efficiency for new homes.
I don’t think enough people have grasped the looming additional disaster of the knock on effects of so many small businesses closing down in such a short space of time. It’s not just the damage to high streets (again), but the associated unemployment and everything that comes with that.
Energy crisis: UK households worst hit in western Europe, finds IMF
https://www.theguardian.com/money/2022/sep/01/energy-crisis-uk-households-worst-hit-in-western-europe-finds-imf
“The energy crisis is hitting UK household budgets harder than any country in western Europe, according to analysis by the International Monetary Fund. The difference between the cost burden on poor and rich households is also far more unequal in the UK compared with other countries.
The reason is the UK’s heavy reliance on gas to heat homes and produce electricity at a time when Russia’s war in Ukraine has sent gas prices soaring. In addition, the UK has the least energy efficient homes in western Europe.”
Ed Davey is right to focus attention on the commercial sector – retail and hospitality in particular. We already have the answer in the LibDem policy suite – the Commercial Landowners Levy
This is what small business organisations have been calling for business rates reform
“Energy prices are influenced by international factors, but the current excessively high level of business rates is entirely in the control of the Government and is being directly fed through to individuals doing their weekly shop.
“For years, this problem has been growing, disincentivising investment and devastating our high streets. The sticking plasters of over a dozen forms of relief add layers of administration and complexity”.
“Business rates reform can empower local areas, allowing more businesses to grow and local authorities to keep more of the money generated by occupied high streets.”
Projected prices are simply not survivable for most households and businesses. Moreover, the few that can pay them mostly won’t survive the economic collapse caused by the failure of the majority that can’t.
If we stay on the present path cold and hungry people will be on the streets as soon as the weather turns cold, and we will be a deindustrialised third world country by Christmas. I’m sorry to offer such a bleak assessment but the beginning of wisdom is to see things as they are and not as we would wish them to be. What is to be done? Some thoughts…
Nothing, I hope, like German Foreign Minister, Annalena Baerbock (Green Party), putting Ukraine first, not German voters.
https://twitter.com/ivan_8848/status/1565067553671626760
Jenny is right that the way the energy market is set up is bonkers but changing it NOW would presumably mean breaking lots of contracts which would likely come with severe blowback later so maybe not a great plan.
The OVO Energy boss has a sensible plan for homes, but it doesn’t help industry.
We could stop sending gas to mainland Europe, relying on our own gas, Norwegian gas and tankered LNG (as before the crisis) but that would be to dump Germany and others into immediate existential crisis and worse blowback.
Ultimately, the only solution is to concede that the West has lost its proxy war on Russia (wrecking Ukraine in the process) and try to get back to ‘normal’.
Housing benefit does not cover service charges for heating, lighting, hot water, fuel for cooking etc where these services are included with rents.
There is an urgent need to supplement housing benefit for all recipients whether included in rents or not to meet their energy costs over the winter.