OK, so Government announces a bright shiny new scheme. Crowds cheer. Then someone opens the box and has a look.
At a press conference to announce the scheme, Mr Brown was asked if he could guarantee that the higher costs to the industry would not lead to further increases in customers\’ bills.
"I do not expect that they will pass on these prices to consumers," he insisted.
"I don\’t think there is a need to do so and I do not expect it to happen."
Hmm, really? There\’s a billion quid just lying around that no one had noticed is there?
Whenever people impose costs on an industry like ours – or indeed just about any other industry – the bill to some extent always ends up with the customer,
Sure. Who else is there? It\’s going to be either the customers or the shareholders and the more inelastic the demand for the product is the more likely it is to be the customers. And, of course, we know what the proposers of the scheme think about the elasticity of demand, for they say that such energy is a necessity that people cannot do without. So they\’re already arguing that the customers are going to pay the (bulk of at least) the cost.
Currently, energy companies are forced to pay money into a fund, called the Carbon Emissions Reduction Target (Cert), which is distributed via the Energy Saving Trust to help consumers cut their energy bills.
Of the £910 million Mr Brown is forcing the firms to spend, around £560 million will be paid via Cert.
However, energy firms pay for the Cert scheme by adding a premium to domestic energy bills. Households are already each paying about £35 per year for Cert.
See?
My grasp of economic theory is no way as good as yours, but I have worked in big organisations for twenty years. One thing that experience has taught me is that s**t will always work its way down to the lowest level possible.
In this case, the customers are the lowest level and what are costs but s**t.