The Contentious £200: the situation as it is, for the avoidance of all doubt.
The chancellor is not giving anyone a rebate.
A rebate is a return of monies already paid.
Neither is he giving anyone a loan: the taking out of loans is a voluntary process regulated by law, at the beginning of which there is a mandatory cooling off period during which you can change your mind.
What the chancellor is doing is that in October this year there will be a £200 reduction in the bills of all domestic electricity consumers. It will either look like a bill reduction, or it will be a bill credit.
If you are on pre-pay it will either be issued as a voucher or it will be paid through your smart meter.
There is no choice in this. it is not optional. It is automatic. You can’t choose not to have it.
This £200 will be recouped, starting from the following April by a £40 a year for 5 successive years enforced levy. You will not have any choice about this. The levy will automatically be added to your bill.
It is, as far as we know, not possible to refuse the reduction and subsequently to refuse the levy. There are already levies on your bill – some of what you pay goes to green energy, for example. This is a similar thing.
Want to know what the catch is?
Anyone who, in the next five years, moves out of an existing household to buy a house, rent a house or create a new household (so someone who is currently living with parents moving out, e.g.) will also have the levy added to their bill.
Effectively, this means that if, e.g. there were 10,000 households now, each one with their bill reduced by £200, it would cost the government £2,000,000. If that number of 10,000 households remains steady, at the end of the first year, the government would have recouped £40 x 10,000 (£400,000) and so on each subsequent year, until, at the end of the five years they would have recouped that whole sum of £2,000,000.
In this scenario there is no profit and no loss.
But what about this scenario?
If by the end of the following years, allowing for some households ceasing to exist because of deaths, and some households to be formed because of e.g. families separating or young adults beginning their own household, there were to be a net increase in that number of 10,000 households – let’s say a gain of 2% of the 10,000 – then in that first year the government would recoup not £400,000 but £408,000.
If that increase in the number of households continues at the same rate, (2%) the following year the government would recoup, from 10,404 households, not the sum of £400,000, but the sum of £416,000.
At the end of the third year, the government would recoup, from 10,612 households, the sum of £424,480.
At the end of the fourth year, from 10,824 households, the sum realised would be £432,960.At the end of the fifth and final year, on a 2% increase in households per year, there would be 11,140 households paying the £40 levy. The yield will be £445,600.
Adding those sums together, after 5 years, the total yield of the levy, instead of the £2,000,000 originally paid out to the original 10,000 households will be £2,127,040, and the government will have made a profit from something we can neither avoid nor refuse.
Of course, those numbers are only illustrative, and back of the envelope. But there are a damn sight more than 10,000 households that are going to get that £200, and although I’m not sure about the rate at which population is increasing and people are being encouraged into new builds (or the rate of divorce: there are an awful lot of variables here, and I do stress that this is simply something which has occurred to me) I’m pretty certain that my 2% increase is probably an underestimate. And that, of course is assuming that the levy doesn’t go up by the rate of inflation each year. We aren’t sure about that.
There’s an old Latin saying “timeo Danaos, et dona ferentes”: I fear the Greeks (no disrespect to the Greek people here as the quote is from Virgil’s Aeneid, about the Trojan War) even when they bring gifts. Don’t ever assume that the Tories in this government are not out to screw you over, folks. This may well be a classic example, of why we shouldn’t be governed either by bankers, or by people 21 letters of the alphabet removed from them.
Martin Lewis is the chap to watch on this. He’s clear, accurate and reliable. Feel free to comment, by the way, but I wouldn’t attempt to defend the government if I were you.