Coffee Space


Tax the Poor

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I apologise in advance, but this is more of a complaint than it is anything constructive and is quite different from the normal program of events delivered here. That said, I make no apology for it’s existence. Without further delay…

In the UK, we seem to have two different types of methods for paying for Gas and Electric. One is by weekly/monthly/annual payment, the other by metre. It is the latter that is the topic of this discussion.

Typically, the metered resources are used for houses which go through a lot of tenants, i.e. in poor areas where people are unlikely to be able to pay for those resources, student accommodation, etc. All these people have in common the fact they are likely to be on the poorer side of average income. Richer persons on the other hand tend to be more financially reliable, therefore able to take out contracts for these basic services.

For paid for bills, we can say the bill 100% represents the resources used.

0001 [                      £150                    ]...

This is not true for metered electric and gas if allowed to run over, as we have the following scenario:

0002 [ £50 ][ E=-£5 ][ £50 ][ E=-£5 ][ £50 ][ E=-£5 ]...

This means that is we were to top up £50 a time, we £5 each top up through burning our emergency credit - which is taken off the next time it is topped up.

As a student in a house where the tenants don’t communicate, the situation is much worse. Each person tops up £10-£15 (average of £12.50), with £5 typically being lost to emergency credit. This means our emergency credit ratio is much higher, meaning a higher loss:

0003 [£12.50][-£5][£12.50][-£5][£12.50][-£5][£12.50][-£5]...

This is how it looks overall:

0004                    Added    Lost    Value
0005 Normal Contract    £100      £0     100%
0006 Large Top-Ups      £100     £10      90%
0007 Small Top-Ups      £100     £29      71%

Basically, the worse your situation, the more money you lose through these basic essentials. Whether intentional or unintentional, these emergency credit schemes on meters impose an additional 29% Gas and Electric tax on the UK’s most poorest individuals.

From another perspective, we start with £100 of gas as an example. The government impose a 20% tax, rising this number to £120. The poorer people in the Country only receive 71% of the gas through emergency credit, but still require the original about of gas - meaning they will spend approximately £169 for gas sold by the company at £100 thanks to the government.

This is a significant amount over the course of a year, especially is you’re already living close to what is possible (see UK PhD Budget).

NOTE: I have made many assumptions in the form of top-up rate, emergency credit and the value from the emergency credit. These are not too far from my current situation at the time of writing. The situation is in fact much worse, with older buildings needing more gas and cheaper products being less energy efficient.