The rapidly rising 'stealth tax' on our fuel bills used to bailout failed electricity and gas firms

[dutchman]

Cash-strapped pensioners paying the most, alongside isolated rural households



Households across Britain are being punished with a ‘stealth tax’ on their energy bills amounting to billions of pounds to pay for the bailout of dozens of electricity and gas supply companies.

Campaigners have condemned the increases to the levy, which has soared over the past 12 months – and now costs bill-payers around £273 each.

The inflation-busting figure does not include the £6.5 billion cost to the taxpayer of bailing out controversial start-up company Bulb, which had 1.7 million customers when it suddenly collapsed.

Most perniciously, the charge is regressive – with cash-strapped pensioners living alone, and frugally, forced to pay as much as millionaires in large, well-heated homes.

Many are unaware of the payments – called a ‘standing charge’ – which are quietly added to every bill.

The charge traditionally covers the daily cost of connecting customers to their gas and electricity supplies, and for the upkeep of networks.

But The Mail on Sunday can reveal that the sums have risen on average by almost 50 per cent since this time last year.

The charge is a stand-alone levy and should not have been affected by the vast hikes in wholesale energy prices worldwide exacerbated by Russia’s invasion of Ukraine.

However, the standing charge rises were approved by industry regulator Ofgem to cover the cost of its bungled regulation of the market, which led to firms going bankrupt.

The ‘stealth tax’ is just one of many issues raised following the collapse of Bulb, whose two founders were allowed to keep the £8 million they pocketed in share payments.

At the end of 2021, households paid an average of £186 in standing charges each year – £87 less than now. The increase across all bill-payers is believed to be more than £2 billion.

Critics say the huge rise is an abuse of power and piles further pressure on household budgets when many – particularly the elderly and vulnerable – are already struggling with the cost-of-living crisis.

They point out that standing charges are set at a fixed rate with no consideration of how much gas and electricity customers actually use.

Tory MP Alexander Stafford, a member of the Commons’ business, energy and industrial strategy committee, said it was outrageous for Ofgem to increase the costs without properly informing customers and pledged to raise the issue with Ministers when Parliament returns.

Former Business Secretary Jacob Rees-Mogg also called on companies to explain why standing charges have risen so much.

Ex-Pensions Minister Baroness Altmann said: ‘It is so unfair that the standing charge hits the poor much more than the well-off.’

As well as being regressive, standing charges are applied inconsistently across the country – creating a postcode lottery that burdens those in rural areas.

London households pay an average of about 60p a day and those in the South West about 80p.

Around 30 suppliers failed in 2021 because they were financially unprepared for the vast increases in energy prices.

Almost four million households needed to be transferred to new suppliers.

Although Ofgem waved through the plan to bail out the collapsed firms using money raised from the standing charge, it is now under pressure to come up with a better alternative.

Energy companies are also being urged to cut the standing charge, as well as spelling out more honestly what the charges are used for.

Rother Valley MP Mr Stafford said: ‘It is simply outrageous to hike people’s standing charges without a full explanation of why households are having to find this extra cash.

‘Any increase is an extra burden that hard-pressed families can ill-afford. It will also hit pensioners harder as they will pay the same as much bigger, better-off households.

‘Energy companies surely have a duty to say to their customers why standing charges have risen on average by £80 since last March.

‘If this is to pay for the cost of coping with the collapse of other energy firms, they should come clean and say so.’

Mr Rees-Mogg added: ‘Any standing charge rises will come on top of families already having to pay more for their fuel this winter.

But energy suppliers should be as clear as possible about why households are having to pay more in standing charges.

‘The energy firms owe it to their customers to explain why these charges are going up.’

Baroness Altmann said: ‘Once you’re connected, what else do you get from the standing charge?’

‘Energy companies have a responsibility to customers and society, not just their shareholders.’

And she warned that small, vulnerable or elderly households are unfairly shouldering the burden – even though they are often the least likely to be able to afford it.

‘There are lots of pensioners who live alone and they pay the same as a family with lots of children or a couple. It’s just not fair,’ she said.

[rebbonk]

The result of flawed policies from the Thatcher era. Privatise the profits, nationalise the losses. The 'free market' is an illusion and no parts of our utilities should have been privatised.

That we are paying a levy at all is bl**dy disgraceful. Those that set up the now-defunct companies with unsustainable and flawed business plans have walked away scot-free.

[dutchman]

They were originally owned by the city council (along with the water) and the profits used to pay for public services like the hospitals and buses (which were also owned by the city council).

Nationalisation was little more than an accounting trick by a bankrupt Labour Government although electricity was never fully nationalised, only the power supply grid.