Graphs at a glance: how electricity and gas bill promises from Miliband and Cameron are just yet more hot air and flatulence

Did Ed Miliband, speaking at the 2013 Labour Party Conference, actually believe his promise to freeze the price of electricity and gas would help anybody other than himself and his electoral (and leadership) prospects? 

Any more than David Cameron believed in his own unequivocal promise to stop energy companies ripping off Britons by making it law that we should be paying the lowest tariffs? A promise Cameron made so clearly, so concisely, so undeniably that we reproduce his words directly from Hansard (Parliament’s minutes):

“I can announce, which I am sure the hon. Gentleman will welcome, that we will be legislating so that energy companies have to give the lowest tariff to their customers—something that Labour did not do in 13 years, even though the Leader of the Labour party could have done it because he had the job.”

David Cameron during Prime Minister’s Questions on 17^th October 2012 shortly before lunch (thus presumed sober).

Cameron never did legislate as he had so clearly promised. And with Miliband giving the energy companies over a year's notice to pump up the price in preparation for any price freeze, he won't either. After all, Miliband didn't promise to lower the price, just to freeze it.

By focusing on the retail price of energy both men succeed in missing the real point: it's the wholesale price, stupid. The CEO of SSE, one of the 'big six' energy companies, bleated in his blog:

"we showed a profit margin of just 1.5 per cent from supplying energy. That’s lower than many other essential services, like supermarkets or mobile phones, for example."

And he is right! Retail energy companies say their profit margins are so low because they have to pay a high price for the energy they buy wholesale to sell to us retail. They scuttle over the fact that the gouging wholesalers they complain about are in fact themselves. The companies that provide the wholesale electricity and gas are the retailers’ own conjoined twins. Each of the ‘big six’ are now able to supply virtually all their own needs. 

Energy companies can pull this scam off because they are permitted to be 'vertically integrated' - i.e. they own both the wholesale and the retail businesses. The graph below, from an OFGEM report, shows how from 2005 energy companies shifted the profits from the Retail to the Wholesale end of their businesses, by putting up the wholesale price they make them pay to themselves. This allows them to claim their profit margins are puny when selling to their customers.

The Parliamentary Committee on Energy & Climate Change reported in July 2013 that while energy companies could claim a measly 1.5% profit margin on supplying domestic electricity, this was covering up a more than 20% profit margin taken by the wholesale generating end of these same companies.

Profit margins	2011 aggregate margin	2010 aggregate margin	2009 aggregate margin
All segments	7.6%	7.2%	5.8%
Generation	24.4%	21.9%	22.5%
Supply	3.1%	3.8%	1.8%
Electricity - Domestic	1.5%	0.3%	2.1%
Electricity - non-Domestic	3.3%	4.7%	4.0%
Gas - Domestic	4.3%	5.7%	-0.4%
Gas - non-domestic	6.5%	6.2%	-0.5%

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Both socialists and neo-liberals should ally to stop the "Big Six" energy firms' rip-off

Fee and Chris explain it all to KJ...

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Rip-off News round-up. Our pick of the last week's media (Thu 26th September)

Miliband promises Labour would freeze energy bills for TWO YEARS

Hard-pressed families would see their energy bills frozen for 20 months if Labour won the election, Ed Miliband promised today. The price freeze would save the average household £120 each and businesses £1,800 on electricity and gas bills. The freeze from the 2015 election until January 2017 would take some of the pressure off squeezed family budgets, which have suffered from years of soaring bills. Households spent an average of £1,339 on gas and electricity last year – an 85 per cent rise on the £710 spent in 2000. Gas bills rocketed by 119 per cent between 2000 and last year, while electricity bills rose by 47 per cent, when adjusted for inflation. Several energy companies have also warned in recent weeks that energy prices are set to rise further in time for the cold winter months. Mr Miliband also promised to scrap the energy watchdog Ofgem and use the 20 months to overhaul the competition and transparency rules to smash the dominance of the Big Six energy firms. DAILY MAIL

Half the families hit by bedroom tax 'now in debt'

The National Housing Federation, which represents housing associations, said a survey of 51 of its biggest members found more than half of their residents affected by the bedroom tax – 32,432 people – could not pay their rent between April and June. A quarter of those affected by the tax had fallen behind with their rent for the first time ever. The government policy has been dubbed the bedroom tax because housing benefit is docked by 14% if welfare claimants in social housing have a spare bedroom. According to the NHF boss, David Orr, ministers have miscalculated the number of homes available for tenants to downsize into. Although 180,000 households were "under-occupying" two bedroom homes, he says only 85,000 one-bed homes became available in 2012. GUARDIAN

Rip-off pension fees 'cost savers £27bn'

In a mammoth report, the Office of Fair Trading declared the £275 billion pensions industry has short-changed and bewildered savers and employers alike with workplace pensions that carry a complex web of up to 18 different hidden fees. An investigation revealed that nearly 1.4 million are paying up to 26% more in charges simply because they are putting money into pensions that were taken out before 2001. Previous research by the Telegraph found that hidden fees and charges meant workers pension savings could be 50% smaller than those on the Continent, despite saving the same amount. The highest annual fee in the market is 2.3% (consuming 50% of your pension pot) and the lowest 0.05%. TELEGRAPH

UK Treasury launches legal challenge against EU plans to cap bankers' bonuses

The EU rule would limit the bonus to no more than a banker's salary, although if shareholders agree it could be higher. The bonus culture has been blamed for encouraging excessive risk-taking among bankers. UK was the only member to vote against the plan. The cap is designed to come into effect on bonuses awarded from 2014. BBC NEWS

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Hidden bank fees mean UK pensions can be 50% smaller than those on the Continent, despite saving the same amount

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Graphs at a glance: Government wants you to think we made a profit on sale of Lloyds Bank shares. Actually we made a thumping loss!

http://markets.ft.com/research/Markets/Interactive-chart

The UK government’s sale of the first tranche of Lloyds Banking Group shares, bought in 2008 to bail out that crashing bank, exposed how we ordinary taxpayers are being soundly ripped-off once again. 

The chancellor, George Osborne, wrote on 17^th September 2013:

“The Government has today sold 6% of the bank’s [Lloyds Banking Group] shares to institutional investors for 75p per share, raising £3.2 billion. The sale price is 1.4p per share more than the 73.6p the previous government bought them at”

This has been trumpeted this as a £61 million profit. Sadly, and predictably, this is not true:

1) The impact of inflation:

Inflation has been running well above target for most of the five years since 2008. This has been driven not least by the government's Quantitive Easing policy. 

Office of National Statistics RPI inflation data shows inflation between 2008 and 2013 has totalled to 15%. This means the value of 73.6p in 2008 with 15% inflation = 85.2p in 2013.

2) The cost of borrowing the money:

The cost to the government of borrowing the bailout money can be calculated from the government bond yields. In September 2013 the 10 year UK government bond cost 2.92%.

To borrow the 73.6p cost of a share for the 5 years between 2008 and 2013 cost 11.3p

Therefore, just to break even the Lloyds Bank shares should have sold at 96.4 pence (85.2p + 11.3p). 

On this basis far from any profit, by selling at 75p instead of 96.4p, we the taxpayers have made a 22% loss!

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A quarter of all MPs give parliamentary office jobs to their family members, costing taxpayers £4m

KJ and Fee try to look on the bright side of nepotism...

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Rip-off News round-up. Our pick of the last week's media (Thu 19th September)

Quarter of MPs give jobs to family: Taxpayers' bill for politicians who employ wives and children soars to £4m a year

Despite fury over parliamentary expenses, 155 MPs – nearly one in four – now have wives, children and even parents on the public payroll. The relatives enjoy salaries as high as £50,000 for office duties – costing taxpayers £4million last year. Hypocritical MPs dishing out taxpayers’ money to relatives while arguing for a freeze on public sector pay include Cabinet minister Michael Moore, health minister Dan Poulter and foreign minister Alistair Burt. MIRROR DAILY MAIL

MPs' expenses rise to record high

The bill for politicians is higher than it was before the 2009 MPs' expenses scandal, with claims of almost £100m last year, official figures show. The total cost of travel, accommodation and running the offices of MPs rose by 10%, which is thought to be a record for claims by politicians in a single year. After the scandal broke, MP's claims fell to £90.7m as parliament brought in an independent watchdog to keep down the bill. The independent parliamentary standards authority said the cost to taxpayers was higher this year because MPs were allowed higher staffing budgets. GUARDIAN

Benefit fraud could lead to 10-year jail terms, says DPP

The Director of Public Prosecutions, Keir Starmer QC, said it was time for a "tough stance" on the £1.9bn annual cost of the crime. Suspects can now be charged under the Fraud Act, which carries a maximum sentence of 10 years. In the past, benefits cheats were commonly charged under social security legislation with a maximum sentence of seven years. In 2012 the number of offenders jailed for benefit fraud was 262 and the average sentence length was six months and one week. Last year the CPS saw more than 8,600 such prosecutions. The changes mean welfare cheating would now be classed alongside offences such as money laundering and banking fraud. BBC NEWS

Barclays to refund £100m to at least 300,000 borrowers

Barclays Bank is to refund at least 300,000 personal loan customers because it made mistakes on their paperwork. If mistakes are made in loan paperwork, all interest paid must be returned. The errors date back to October 2008. It is now investigating whether similar mistakes had been made in other parts of the business such as Barclaycard. This is the latest in a catalogue of problems for the bank including: a £290m fine for attempting to manipulate Libor; £2.6bn to compensate customers who were mis-sold payment protection insurance; setting aside £850m to compensate businesses that were mis-sold products to insure them against interest rate rises. BBC NEWS

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New “tough stance” means all benefit fraudsters face increased sentences of up to 10 years in jail

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Graphs at a glance: The poorest fifth of Britons pay a higher rate of tax than the richest fifth says the Office for National Statistics

The wealthy and their pals in government and in the media whine that they are over taxed. The fact according to the UK government's Office for National Statistics is the wealthiest fifth of Britons pay a lower rate of tax than the poorest fifth. ONS figures reveal:

• For every hundred pounds of a rich man's income £35.50 is paid in tax.
• For every hundred pounds of a poor man's income £36.60 is paid in tax.

How is this possible? Because these figures include both direct taxes (e.g. income tax) as well as indirect taxes (e.g. VAT). 

Each Quintile is 20% (a fifth) of all households, from poorest to richest.

When hunting for a tax cut the rich lobby only talks about Direct Taxes (income tax, national insurance etc). They conveniently ignore Indirect Taxes (VAT, excise duties etc). Indirect taxes are taxes on spending. The poor spend all they have, while the rich don't - resulting in spending taxes hitting the poor harder.

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The Royal Mail is to be privatised to stop it “competing for funds with our schools, our hospitals.”

...or will it, wonder Fee, KJ and Chris...

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