The energy price guarantee should have been targeted to help those in need - Andy Brown

Back in the dim and distant past, when Liz Truss was running her reckless experiment with our futures, most of the attention was focused on the way that she crashed the pound and the interest rates hike. That was perhaps understandable as millions of ordinary people paid the price when their mortgages went up and the nation was hit with equally horrible increases in the cost of servicing the national debt.

There was a lot more public sympathy for her decision to help out with the cost of paying energy bills. Yet the way that she decided to do that has been every bit as damaging to the nation’s finances. It is just more obscure and harder to understand.

The main mechanism which was used was a subsidy on the amount that could be charged for a unit of gas or electricity. The sheer scale of what was done staggers the imagination. It was never easy to predict the eventual cost because it depended on how prices moved on world energy markets. Yet at the time it was introduced Sky News reported serious estimates of between £70bn and £140bn.

It will be less than that because the wholesale price of power has dropped. The Resolution Foundation has published a realistic estimate of £16bn. That is still a staggeringly large amount of money even in terms of huge bills for government expenditure. To put it into context the Health Minister Maria Caulfield has said that it would cost £700m to fund a 1 per cent extra rise in nurses pay. She was wrong. That less than one billion price tag is what it would cost to fund a pay rise across most of the NHS, not just for nurses.

When enough money to fund a 23 per cent pay rise across the NHS is being spent on a policy it is rather important to make sure it is a very well targeted programme. It isn’t. It has the effect of helping anyone who pays a large energy bill a lot more than someone who pays a small one.

Imagine for example that you are an elderly pensioner who is scared to put money into a prepayment meter because the choice is either to stay warm or to eat properly. Such a person gets very little help from the subsidy because they are using very little power.

Then visualise the circumstances of someone who is lucky enough to own a very large mansion that is very badly insulated yet decides to keep the heat roaring away because they have plenty of money and can easily afford the bills. That person gets a massively larger subsidy from the taxpayer than the poor pensioner.

Most well designed taxes and government support schemes have what is known as a progressive impact. The richer you are the more tax you pay and the fewer subsidies you receive. This one works the other way round to an extraordinarily wasteful degree. The bigger your house the more help you get from the taxpayer.

Those subsidies are going to come to an end in April because no government can afford to subsidise everyone’s energy bill forever. Precisely targeted support for those most in need could have continued for a considerable period of time and lasted until prices dropped.

If we are all lucky then the drop in wholesale prices which has taken place in the last few months will continue and we may not experience too bad a shock. It is, however, entirely possible that oil and gas companies will prove to have been very keen to put up prices but a lot less enthusiastic about putting them down again.

Last year one energy provider, Shell, made £32bn in profits. It was not alone in doing very well out of the crisis. It is of course not possible for a company to make any extra profit if it simply passes on to the consumer the rises in costs that it has experienced without increasing its margins.

There may be some who will wish to spare a thought for those who have pocketed those huge new profits at the public expense. Or for the owners of those mansions as their subsidies come to an end. Or for Liz Truss as she tells us that it wasn’t her fault that she crashed the economy and she was actually the victim of a conspiracy by the liberal elite.

Most of us may wish to to save our pity for that poor pensioner searching in the bottom of an empty purse for the next pound coin to feed the prepayment meter that has been forcefully installed in her home.

Andy Brown is a Craven District Councillor representing Aire Valley with Lothersdale and the Green Party North Yorkshire Councillor for Aire Valley.