Reduce your electricity bill -- in three easy steps!

Follow this easy guide!

1. Find someone, preferably local, who fixed their electricity rate a while ago and who still has plenty of time left on their fixed-price contract.
   
   
2. Run an extension lead to their house, pop an electricity meter on the lead and connect that to your house's main circuit. (You may prefer to ask an electrician to do this.)
   
   
3. Tell your current supplier that you'll be getting your electricity elsewhere and ask them to disconnect you from the grid. (Otherwise you'll be paying the daily standing charge.)

Congratulations -- you just cut your electricity bill!

Now pay for the electricity that you use, direct to your neighbour, at the fixed-rate on their account. Also, pay half of their daily standing charge -- it's only fair.

The fact that this would theoretically work tells you all you need to know about how ridiculous the electricity supply game is in Britain.

The same electricity, travelling down the same cable from the same sub-station, fed from the same power line -- and yet charged at a dramatically different rate purely based on the random chance of whether and when the customer took out a fixed-price contract.

Alternatively...

If you don't like this approach, your best bet is to wait until the system is changed to one in which the country's electricity requirements are estimated, the electricity is bought and/or generated at a sensible price, the unit cost is calculated by dividing one by the other, and everyone is charged at that rate.

You'll probably be waiting a long time for that.

Because, while economy of scale is absolutely taken for granted in the corporate world, if you try doing that as a community of people, you'll be laughed out of town as a communist.

Irritate The Innocent, Ignore The Guilty

The Before Times

A few years ago, people using contactless cards at my local railway station could tap their card on a card-tapping machine. There were several of them, on many different walls. It was quick and easy.

Going in? Tap and beep. Person staring uncomprehendingly at one machine? Use the other one across the corridor, or a bit further up, or just over there. Tap and beep.

Going out? Tap and beep. Any machine. Doesn't matter. Just make sure you do the tap and hear the beep and it'll be all good.

Using a paper ticket? How very retro of you. On your way. Nothing to do except leave. Or enter. Depending on whether... well, you can work out the rest.

Then The Gates Came

The old tap and beep machines are still there but they are decommissioned and sad and turned off. They do not glow or beep, no matter how much you may tap them.

Instead, you must now use the gates, with a tapping pad on them and some of the slowest response of any machine in the twenty-first century. (There may be slight exaggeration in that sentence.)

The queues, or scrums, or disorderly gaggle fills the corridor and clogs the stairs as each person taps, waits for a beep, waits for the gates to heave themselves open.

Anyone rushing to get onto a train can forget about it. There are people waiting to tap and beep and they ain't clearing the corridor or stairs for anyone.

This does not seem like an improvement.

But The Revenue Is Protected (Oh No It Isn't)

No it really isn't. On any given day, you can watch a person or two or twelve tail-gate someone else through the gate, or just do a little hip-swivelling shimmy to nudge the gates apart enough to allow them to leave.

The dour-faced under-trained, high-vis-jacketed man stands and observes. No doubt intervention is above his pay grade.

The honest, upstanding, ticket buying member of society is delayed in a scrum of despond while the scallywagg fare evader is untroubled.

So the installation of gates has inconvenienced the innocent while making no difference to the guilty. I wonder how much they cost to bolt onto the floor, how much they cost to maintain, how much they cost to run (electricity is quite expensive right now, don't you know) and how much fare evasion they have prevented...

Other Gates

Last month, an Avanti train arrived at Oxenholme station (in the beautiful lake district) so late that the staff had locked the station and gone home. You can read the shocking story here. 

Some passengers climbed over the two-metre (spiked) gates in order to leave. The rest had to wait for the police to find a maintenance worker who had a key.

Given that the gates could be climbed by some (several? loads?) of passengers, and assuming that they weren't competitors returning from a parkour convention, I think it's reasonable to assume that the gates aren't that great at stopping able-bodied people from getting into or out of the station.

So anyone wishing to get up to mischief at that station could probably just climb in, using the assumption that railway mischief-makers are generally going to be able to climb. (You've only got to look at some of the astonishing places that railway graffiti ends up to realise that railway ruffians are good at scaling heights.)

Which means that these gates are also fairly pointless since all we're certain they've done is to imprison passengers for the 'crime' of travelling on a late train.

Money

Yes, it all comes back to money in the end.

Anti-money-laundering approaches are like railway gates. How many times must we jump through bankers' hoops to prove our identity so that they can know their customers?

And how many times does that stop people's accounts being drained by scammers? One approach, apparently, is to fool someone into moving funds into another (innocent but stupid) person's account, who is then instructed to move the money again, thereby fooling banks by the amazing process of moving money twice.

Don't the banks know the person in the middle? Because they know their customer, don't they? And wouldn't they know where the money was going to? Because they would know that customer as well, wouldn't they?

What's that you say? The money goes to a foreign account? Oh, that explains it then. Because all financial services outside the UK are completely unregulated and therefore it's impossible to ever, ever, ever track any money that's gone into that lawless realm. (I'm being sarcastic.)

So we, the innocent and the honest, wave our photocopied passports and paper utility bills (who has paper utility bills?) and receive one-time passcodes on our phones and are sent passwords in the mail and wait and wait and wait and wait.

While the dodgy dealers simply push through the bankers' useless gates or vault the financials' fence. While the data-protecting high-vis jacketed bank staff look on and say there's nothing they can do.

Call this a right-wing government?

 (For the avoidance of doubt, this is SATIRE. It does not reflect my actual views.)

Why won't the British government properly protect the interests of sensible, self-sufficient citizens?

Last year, having correctly predicted that energy prices were about to rise dramatically, I took the sensible precaution of arranging a fixed-price deal with my supplier that will protect me from price rises until September 2023.

This option was open to anyone in the UK but a startling number of people did not take it. Instead, they decided to chance their luck. And, boy, did their luck not hold out.

Still, that's what happens when important financial decisions have to made in the free market economy. Some people win and some people lose.

And we can't have the alternative. You know what that would mean:

• bulk buying for the whole nation to get economy of scale and equal pricing for all
• some people would be paying a tiny bit more and some people would be paying an awful lot less

Someone has to stand up for those who would be paying a tiny bit less. Like me. Because I'm smart and have a fixed-price deal.

But now the government is going to stab me in the back.

How dare they charge me to bail out the mistakes of others?

The government has introduced a price cap to protect people from ludicrously high bills. They are restricting the utility company's abilities to charge whatever they like for energy.

I don't need that. I protected myself.

This is going to be paid for through taxation and a levy on energy bills for many years to come. So I'm going to be forced to pay to bail out utility companies and people who didn't have the foresight to fix their energy prices.

The money to pay for this bailout is going to be borrowed from banks. Not the Bank of England (which the government owns), but other banks (which they don't). So interest charges will accrue.

The government is forcing me, through taxes and levies on my bills, to bail out utility companies, people who didn't think to fix their utility prices and, additionally, to pay interest to banks for a loan I neither want nor need.

I'm being ripped off

Imagine things the other way around. Imagine if I had fixed my energy prices at a high rate and then the cost of energy fell.

• Would the utility company help me with my bill?
• Would the government give me money towards my costs?
• Would other people be taxed to help me pay my bill?
• Would the government borrow from banks to help me pay my bill then pass on the interest charges to other member of the public?

I think we can agree the answer would be 'NO' to all of those questions. (Except, perhaps, the last because there's nothing governments like more than giving money to banks for almost no reason -- here's an example. Or if you prefer it phrased less respectfully, here's another.)

In this case, the utility company has made the mistake of agreeing to supply energy to me at a price that means they will make a loss. Well boo hoo. That's the free market for you.

They've also failed to arrange long-term sensible prices for buying the energy in for resale. That means they can only buy it at a price most of their customers can't afford. Which isn't going to be great for sales.

So they either have to expect to sell much less of it (and ride out the hideous consequences, both for their financial position and the cold population) or they sell at a loss and either have to dig into their reserves or declare bankruptcy.

How dare the government charge me to prop up the finances of a failing company? Let them go bankrupt so a proper capitalist can take them over and run them properly.

But if I'm expected to help them through these dark times, I want something more than just a bill for supporting them. I want shares in the company. Because otherwise I'm paying money into large corporations and getting nothing at all back for it.

And that is a rip off. Another example of large companies as benefit scroungers.

Emperor's New Elephant In Your Blindspot

( I couldn't pick a single cliché for my title.)

The world price of gas.

Let's just think about that for a moment. Wherever you are in the world, there is a price for gas. It's the world price. It's the price you must pay to buy gas.

(Yes, I know there are contracts and futures and spot prices and blah blah blah... but behind all that complication is the simple fact that it doesn't matter who you are or where you are, the price is the price is the price.)

And yet, the price of anything is only known when there is a sale. Until that point, all we have are bids and offers. Everyone knows this.

That house isn't 'worth' £1m because it's for sale and that's what the advertisement says. That's simply an indication of what the seller is hoping to get for the house. Similarly, if the buyer offers £900k, that doesn't mean the house is worth £100k less than the seller thought. When it sells at £925k, that doesn't mean the correct price was £925k and thank goodness we discovered it, phew, etc. It just means that the seller and buyer reached an agreement that they could accept that monetary value for that house between them on that day.

So what's the world price of gas? And why is it currently so high?

It's only high because buyers are buying it at a high price. If they weren't, that wouldn't be the price, no matter what the sellers might want, any more than the price of that house was £1m when no one was buying it for that.

So why aren't the buyers offering less?

Free markets

As touched on previously on this blog, free market ideology has a tendency to favour the freedom of rich people to get richer. By doing things like accepting very high prices when buying gas.

How about the freedom of the buyers to get together and agree that they won't bid each other up to crazy rates? Are they not free to do that? Why not?

The sellers are all operating through the 'world price of gas' which serves to inflate the price. How would it be wrong for the buyers to operate through the 'world buyers of gas' (which sadly doesn't exist) which considers the costs of exploration, extraction, transportation and dividends to shareholders and then offers a fair price?

The fossil fuel companies are smaller than the world

As ridiculous a heading as that clearly was, it seems that some people don't realise it.

The fossil fuel companies consist of a tiny number of people who are very good at obtaining a substance and selling it. But if their mechanism for selling it will lead to their amassing vast wealth while impoverishing huge number of others, it might be worth considering that they are dependent on the rest of the planet's people. And that they should be happy with lots of wealth rather than aiming for vast wealth.

Because, let's face it, the fossil fuel companies weren't exactly destitute last year (or the year before for that matter). Last year's profits were pretty good.

And this year's are going to be stratospheric -- but only because we are paying their crazy rates.

All it needs is for enough of the gas buyers in the world to say the prices are ridiculous and to offer less. And to stop bidding against each other. And to deal with any shortage themselves rather than letting the market decide by selling everything at such a high rate that demand drops to meet supply.

There's another way for demand to drop to meet supply -- international agreements. And that route doesn't lead to economic collapse. Sure, a few countries will break ranks and offer more money and get more gas. But so what? As long as enough big customers can stand firm, the price will drop.

And the fossil fuel companies will still do very nicely. And economies won't collapse. And everything will certainly be a lot better than keeping the current arrangement.

Alternatively...

Carry on. But what happens next year when the price is even higher? After all, they know we'll roll over and pay this year's crazy prices.

So why not try for even more next year? Why wouldn't they?

Face down the bullies now. It'll only get harder the longer you leave it.

Economics for rich people - a brief guide (part one)

If in doubt, ignore rich people. Don't try to placate them, control them or even offer the gentlest of nudge. They'll circumvent, waste your time and tie you up in knots. So just ignore them and decide what's best for the majority.

But, on the odd occasion when that doesn't work, here are some helpful pointers.

Inflation or recession?

Easy -- rich people prefer recessions.

Inflation erodes the values of savings (which rich people have, do try to keep up).

Recession makes poor people unemployed and destroys a few businesses that rich people probably don't use.

Government spending

Just roads, thanks. (Maybe a few police but not too many.)

Rich people have got health-care, education and security. They're not top users of public transport. Libraries -- don't be silly.

But they do have to drive on the same roads as everyone else.

Benefits

Rich people, of course, are frequently utterly dependent on benefits.

Because many businesses pay their employees too little to live on. The state has to step in with benefits so that these employees can actually afford to take those jobs.

Are the employees really the recipients of the benefits? Or is it the company (and its owners) that stand to gain as a result?

Without companies having ready access to this state support, there might be proper competition in the job market. Companies that actually were economically viable would pay decent wages and employees would gravitate there. Companies that didn't pay enough wouldn't have staff and so would have to offer a better deal.

This will be a sticky one to unpick.

How did we get here, where deadbeat employers don't pay their staff enough to live on so that state has to make up the difference?

Could it be that (whisper it) the minimum wage is actually too low if it isn't enough to live on?

Isn't it extraordinary that the question even needs to be asked?

But it really needs reframing. The government is paying benefits to enable economically unviable companies to make a profit. The companies are benefit scroungers.

How about starting with a little shaming -- companies list number of employees and number dependent on in-work benefits.

Any company with more than, say, 10% of their employees requiring benefits is classified as a scrounger and gets to pay more business rates.

(Never going to happen.)

You're welcome

Further installments of this series will be along from time to time.

Guaranteed effective -- or your money back!

Economics -- what actually is it?

An attempt to model the big, hairy world of finance and business using a mixture of gross simplifications and guesswork?

As useful to the way the world works as astrology is to astronomy?

Regardless of the situation, there's normally an economist to argue convincingly for one solution, another to argue for the opposite and a third to explain why they're both wrong.

And yet here we are. The Bank of England's economists have told us that we must all pay more money to the banks in order to prevent inflation. (See previous post.)

Error 1 -- inflation follows wage increases

This is the reason given by Andrew Bailey at the Bank of England (salary estimated to be somewhere over £500,000) why wages must not go up because otherwise there will be inflation.

This seems plausible. After all, if businesses think you've got some extra money they're going to try to grab it by hiking their prices. And what does a price hike mean? Yes, it's inflation if it happens in too many places at the same time.

But there's a flaw in the reasoning, Andrew, isn't there? We currently have inflation and the vast majority of people in the UK have had no (meaningful) pay rise in a very long time.

So what you're saying is that we shouldn't have the bad inflation where people can continue to afford to buy stuff. Instead we should have the good inflation in which people go hungry. Thanks, Andrew!

Error 2 -- interest rate rises are necessary to tackle inflation

The argument that people need to be poorer, by being ordered to give more of their money to banks, in order to reduce demand in the market in order to force prices down in order to reduce inflation doesn't stand up to the slightest breeze.

Even if you accept the idea that demand must drop to beat inflation and so people need to have less money for discretionary spending, interest rate rises are the actions of a sadist on a suffering population.

Because people are already poorer. The cost of living has already risen catastrophically.

The ludicrous rise in energy prices (in which we are forced to give vast profits to fossil fuel companies for no reason), coupled with rampant profiteering from other companies using the energy crisis as a smokescreen, means that people have less money to spend. Demand will drop anyway.

The rise in energy prices was like being mugged by the fossil fuel companies. But the interest rate rise is being kicked by your own government when you're lying on the ground after the mugging, then them stealing your shoes.

Error 3 -- interest rate rises are necessary to preserve the value of the pound

Interest rates have just gone up.

The pound has just fallen to its lowest level against the dollar since March 2020.

I don't think we need to go any further with this one.

It's all gambling anyway

The Bank of England is gambling that the economy can be saved by pouring money from the population into the banks. To match the money being poured into the fossil fuel companies.

With the political will, we can fix the fossil fuel problem. (Obviously we'd need a functioning government that actually wanted to help, but that's a different problem.)

But the interest rate rise requires a different approach. How about the Bank of England actually cuts us in on their wager?

Rather than forcing the population to give the banks bigger profits, how about putting the extra money they're draining from people into special ring-fenced accounts?

If inflation then goes down, and the Bank of England can prove that interest rate rises helped, that money can go on its merry way to whichever bankers' yacht it would have gone to anyway.

And if it doesn't, then the banks can give it all back. With interest (preferably at the new higher rate, just before it's scrapped).

But how can they prove it?

Yes -- my suggestion is based on the idea that the Bank of England might be able to prove that the rise in interest rates reduced inflation.

How can they prove it? Good question -- I don't know.

But if they can't come up with decent proof, then what on earth makes them think there's any link between the two things? Surely they wouldn't inflict economic catastrophe on so many people without a good body of evidence? In which case, they can show it off and the money can be kept in the banking sector.

By the way, 'proof' does not mean that they put up interest rates and inflation then fell. That's just two things happening. We need proof that one caused the other.

If you're happy with the idea that one thing happened after another means that the first thing caused the second, then I'm going to tell you that the sun only rose this morning because I did a little dance in the garden just before sunrise. And unless you pay me a squillion pounds, I won't do the dance tomorrow and the sun won't rise. Are you prepared to take that risk?

Is the Bank of England prepared to take the risk that people might get a refund of their extra interest charges? If not, it means they're not confident it will work -- in which case how about not doing it at all?

If so, bring it on! Come on Andrew -- roll the dice and see if you get lucky.