Blunt instruments

Tweet A couple of weeks ago, in his column in the Western Mail, Dylan Jones Evans made the remarkable suggestion that the governments in Cardiff and London should use their purchasing power to buy enough electricity and gas at a low price to supply all pensioners, and then make it available at a special "vastly reduced" pensioners’ tariff.  Or, if the suggestion isn’t that remarkable, the source at least is.

For some reason, that particular column never actually seems to have appeared on Dylan’s own blog, although he’s usually pretty assiduous about replicating his column there.  I couldn’t find it on the Wales Online site either, but I did manage to find a news agency version here.

I don’t have any objection to the suggestion as such, although it does seem to me that there are one or two potential problems.  More mportantly, I don’t really understand why one would limit such a plan to energy and pensioners.  After all, it isn’t only pensioners who have difficulty with their bills; and it isn’t only the energy bills with which they have difficulty.

Given that pensioners currently make up about 1 in 6, but are projected to become 1 in 4 by 2050, if the state is going to buy enough energy for a quarter of the population to get it cheaper, why not go the whole hog, and buy enough for all of us?  And why not include telephones, and water, and…

And that brings us to what seems to me to be a flaw in an otherwise laudable idea.  The money saved by using government purchasing power to buy large quantities of energy from the energy companies has to come from somewhere. 

There are only two possibilities in reality.  The first is that the energy companies take the hit and reduce their profits by a corresponding amount.  I’m not sure that anybody really believes that that is likely to happen.  The second alternative is that the price paid by other customers increases by a corresponding amount; the ‘purchasing power’ of a small number of large buyers only really works if there are a large number of small buyers whose prices can be hiked to compensate.  And that seems a far more likely outcome.

I wouldn’t dismiss the idea on those grounds either.  It amounts to a redistributive policy in effect – those who can afford to, pay more, whilst those who cannot, pay less.  Not so much a stealth tax as a stealth redistribution. That’s normally a proposition that I’d be happy to support.  Whether intervening in the energy market in this fashion is the best way of achieving redistribution is another question – it’s a pretty blunt instrument compared to using the tax system to achieve the same result.