ALEX BRUMMER: Raising the standing charge is an unapproved tax hike

UK’s furtive energy rescue: Raising the standing charge is a stealth tax hike which was never formally approved in the Commons, says ALEX BRUMMER

Britain has a reputation for the integrity of its economic and financial management. That is why Trussonomics came as a shock to the markets last year.

As we enter 2023 the concern must be that transparency and trust in the manner in which the Government and regulator Ofgem is tackling the serial collapses among energy firms is disgracefully opaque.

The standing charge on household energy bills is being used by the regulator to reclaim some of the costs associated with the failure of more than 30 energy suppliers in the volatile energy market in recent times, as The Mail on Sunday disclosed at the weekend.

Stealth tax: The standing charge on household energy bills is being used by the regulator to reclaim some of the costs associated with the failure of more than 30 energy suppliers

This silent bail-out, being paid for by households hard pressed by the surging cost of living, has never been publicly scrutinised. It is in effect a tax jump which has never formally been approved in the Commons. 

We should not be surprised. The effort to introduce an element of competition into our energy markets has been an abject failure. 

The lack of scrutiny by the regulator Ofgem made the energy market a playground for the unscrupulous and has cost the public dearly.

Choice has been gobbled up, customers moved with no certainty of future tariffs and previously ring-fenced customer credit balances are being abused. The bill is falling on households but we don’t know precisely the sums involved.

Gordon Brown’s government paid a heavy political price for the banking rescue in 2008. The bail-out, organised by the Treasury and the Bank of England, was fully costed. 

It was accompanied by swift managerial changes and limits on dividend and bonus payouts to bankers. No such clarity exists in the energy market.

THE most extreme example of a lack of clarity and contempt for the taxpayer is the rescue of Bulb. Everyone understands that the wild swings in energy prices have caused serious problems.

Nevertheless, when there is intervention the public has the right to know exactly what is happening.

The first inkling that the failure of the self-proclaimed digital age supplier Bulb could prove the most expensive taxpayer rescue since the banks came in a footnote in the Office for Budget Responsibility Report (OBR) in October which estimated costs at a whopping £6.5billion.

That is not the end of it, although the data is hugely confusing. In late December 2022 the Government acknowledged that it was providing £4.5billion of potential assistance to buyer Octopus to take on Bulb’s 1.5m customers. 

No one knows how the £6.5billion was calculated and how it relates to the £4.5billion. The latter appears to be a separate forward estimate of wholesale purchasing costs from October 2022 to March 2023.

As critically, we still have little understanding how Octopus became the preferred bidder in spite of challenges by Centrica in the courts. Once again the Department for Business, Energy & Industrial Strategy (BEIS) and Ofgem have shown disregard for the public accountability.

If and when the National Audit Office gets its teeth into this fiasco it cannot fail to find ministers, BEIS and Ofgem officials seriously in breach of responsibilities to Parliament and the public.

The episode represents a deep scar on the probity and transparency of government.