Sput wrote: ↑Sun 03 Apr, 2022 09.22
I’m not sure what outcome you want
...the one I described? Cheaper fuel and energy bills funded by tax cuts?
Sput wrote:except that you’re now you’re feeling the downsides of the free market
Yes in the sense that it will affect me, but I'm fortunate enough that I don't have any gas in my property, my domestic electricity usage is quite low (especially now we're at the end of heating season) and so I can tolerate quite a jump in my bills in percentage terms without that actually adding up to a huge amount of extra pounds and pence. Petrol not quite the same situation when I'm driving 300 miles / week commuting but even then I'm not (at present anyway) in a position of being unable to afford it. Ditto increased food costs. It's not primarily me that I'm worried about here.
Sput wrote:so you want some intervention?
The problem has been caused because of interference with the free market by governments! Firstly shutting the world down two years ago caused an artificial collapse in demand which saw prices plummet and in turn production slashed and the reverse happening last autumn as demand increased before production was ramped back up causing a massive spike in prices which wouldn't have happened in the first place if we didn't have the intervention that caused production to be slashed. We can argue all day about the rights and wrongs of it happening, but it is still intervention which did it.
More recently that bad situation has snowballed into something worse as imports from Russia have been cut off causing a further massive spike in global oil & gas prices which again has been led by government intervention rather than the free market. Whilst cutting off Russia is absolutely the right thing to do (whatever I would do, I would not fund an unprovoked war by buying their oil & gas), the flip side is that when interventions like that are done a responsible government has to counter that at the other end by reforming the tax model in order to limit the increases at retail. Intervention to limit prices is not even new - the very fact that there is a price cap on domestic energy bills (although admittedly for many it will feel like having little utility right now) is intervention. It's hardly rejection of free market economics by agreeing that in certain circumstances intervention is the right thing to do, that's just an admission that it's not a perfect system which sometimes needs extra checks & balances - and that's true of any economic system.
Sput wrote:I think doing as you suggest just amounts to faffing around at the edges. Those subsidies and VAT being removed would cost a lot and only take prices down to what they were a couple of months ago (I.e. still very high with potential to increase).
It depends on what. Where I live the cheapest petrol available currently sits at 157.9ppl from a Morrisons forecourt. If there were no VAT on it then (assuming full pass-on of the savings - which I would say is more likely than not from a major supermarket) that immediately drops the price down to 131.6ppl, without any further cuts to fuel duty. That's pretty much the level that prices had settled at for much of 2021 prior to the increases of last September. Filter through a similar reduction on diesel prices which then reduce logistics costs and that would do so much not just to make it cheaper for people to run their cars, but to start to reverse the price hikes on everything that are coming through now.
Domestic energy bills obviously will not be quite so impacted with VAT at a much lower rate to begin with. They will need additional tax cuts, followed by a cut in the price cap to force suppliers to pass those cuts on.
Sput wrote:Maybe it’d be better to “spend” the equivalent money to subsidise public transport and run more services in rubbish areas. Fares are appalling as a proportion of a lower income and both drivers and non drivers could take advantage.
For myself, it would actually be perfectly viable for me to commute to work by public transport and I'd much rather do that than sit in a traffic jam twice a day - and I'd even be going green into the bargain. Unfortunately it would work out at £17 / day (or at least that's what it was last time I did it, which was before the recent rail ticket increases). Season tickets can reduce this cost, but not substantially so. Conversely even with petrol as high as it is, if driving economically I can do it for just under £10 / day and if road fuel does eventually drop it will get cheaper vs public transport fares which only ever increase.
So yeah, mass subsidies for public transport to get fares down and increase services, fine. Same problem though - how would you fund them? Their operating costs have gone up. They would need higher subsidies than they would a year ago. It all boils down to the same thing - nothing can improve until the retail price of fuel and energy significantly comes down. That's why governments need to use the levers they have available to them in terms of tax reform to make that happen.