Energy Bailout Will Help Corporate Oligarchies That Don’t Need It!
Opposition MP’s Say Package Should Target Businesses Most in Need And Prioritise Energy Efficiency
MPs have expressed worry that corporate giants may receive enormous discounts they don’t need as part of the government’s energy rescue for businesses.
In order to help businesses, non-profits, and public sector organisations including schools get through the winter, the government on Wednesday unveiled a package of support measures, including a cap that would cut the unit price paid for energy by half, starting on 1st October. The plan will cost, according to one estimate, £25 billion.
However, concerns are rising in Westminster that the bailout’s broad scope would result in large enterprises receiving discounts they do not need when they could easily withstand the increase in energy prices this winter.
Darren Jones, the Labour MP who chairs the business, energy and industrial strategy select committee, said: “Capping the price for all businesses is a waste of taxpayers’ money, which should be targeted at those which need it the most. Why should British taxpayers collectively get into even more debt to hand over public funds to Amazon?”
Labour MP Charlotte Nichols said: “The government shouldn’t be profligate with taxpayers’ money and, frankly, a price cap set at the same rate for all businesses is just a huge corporate handout to businesses that won’t need it, rather than targeting support at those that will.”
Carla Denyer, co-leader of the Green party, said the scheme needed to prioritise energy efficiency and be “more targeted than just a blanket cap on wholesale energy costs”.
Denyer said: “Many small businesses will need help with reducing their energy costs. We would provide companies with grants towards the new energy-efficient equipment.
“For larger businesses who can afford it, I would like to see government energy bill support conditional on detailed and credible plans to improve their energy efficiency and reduce carbon emissions over the next few years.
“That way, rather than a short-term sticking plaster, it’s an incentive for businesses to make lasting improvements that will benefit the climate and their own productivity.”
The government has stated that it will impose restrictions on businesses receiving various types of assistance. The Treasury and the Bank of England unveiled a £40 billion fund earlier this month to provide energy traders with liquidity if they accept a set of as-yet-unspecified terms. These might include limitations on CEO bonuses and dividends.
Following public outcry, major merchants during the pandemic, including Tesco and Sainsbury’s, returned business rates relief to the Treasury.
The business department published a “supported wholesale pricing” on Wednesday, which it claimed would be less than half the wholesale costs predicted this winter. This price is estimated to be £211 per megawatt hour for electricity and £75 per MWh for gas.
Due to the cap, business users’ electricity costs will still be more than half of the anticipated winter rates of around £540, but they will still be around double what they were in October 2021 when the price per MWh was £117.
Businesses won’t need to do anything because the reductions will be applied automatically to their bills.
The amendments will be effective for contracts signed after 1st October and for fixed-term agreements signed before that date.
Those on default, deemed, or variable tariffs will get a per-unit discount on energy expenses, up to a maximum of the difference between the supported price and the average predicted wholesale price during the course of the plan, according to the government. This reduction will probably cost around £405 per MWh for electricity and £115 per MWh for gas.
For businesses on flexible purchase contracts, typically some of the largest energy-using businesses, the level of reduction offered will be calculated by suppliers according to the specifics of that company’s contract.
The government vowed to publish a review into the operation of the scheme in three months as it studies whether to extend the support beyond next March.
Since wholesale energy markets determine the price, it is uncertain what the government will pay. Cornwall Insight, a consulting firm, predicted a cost of £25 billion, while Investec predicted a range of £22 billion to £48 billion. In its fiscal update on Friday, the government is anticipated to detail the costs.
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