Energy policy in Britain has been a mess for as long as anyone can remember, and shows few signs of getting better. With customers facing swingeing increases in fuel bills, the consequences of years of neglect – and of living high on the hog of cheap North Sea oil – are coming home to roost in the most uncomfortable of circumstances, further squeezing already stretched disposable incomes.

The shock of yesterday’s price increases by British Gas, which may send overall CPI inflation surging to more than 5 per cent, is all the worse in that we have become used to relatively low energy costs in Britain. There is no point in blaming British Gas and its parent company, Centrica, for the scale of the price rises, or in knee-jerk calls for windfall profits taxes to penalise the supposedly evil energy companies.

Profits at British Gas collapsed 69 per cent in the first half, and the company was running at a loss by the end of the period. With wholesale gas prices for this winter at nearly double the level of a year ago, British Gas would be hundreds of millions of pounds in the red for the remainder of the year if it left prices unchanged. British Gas’s own energy bill has gone up £2bn in a year, and if it wants to stay in business at all, let alone fund the massive programme of investment demanded by the Government in renewal and renewables, it has to pass these increased costs on.

It’s always possible, but as far as I can see there is little evidence of gouging going on here, though it is certainly true that British Gas and others were slow to put their price down when wholesale costs were falling. The plethora of different tariffs and deals make it almost impossible to compare charges of one company with another, and therefore ascertain whether competition is working as it should in ensuring the lowest possible prices for consumers.

Yet even taking account of strongly rising profits being earned from Morecambe Bay and other gas production assets, Centrica’s profits as a whole will be lower this year. In any case, the Government is already benefiting from the windfall tax it imposed on North Sea profits a couple of years back.

The effective marginal rate of tax on Morecambe Bay profits is, as a consequence, at 75 per cent, with the result that Centrica’s overall rate of tax on profits will rise to nearly 60 per cent this year. Centrica will be paying some £200m more tax to the Exchequer despite the precipitous fall in the profits at its British Gas offshoot. This can hardly be seen as profiteering that ought to be countered with more taxation.

I don’t want to get too much into the argument over whether the company is doing enough to counter “energy poverty”, though there is no reason to disbelieve Centrica’s claim that it is actually doing quite a lot more than others. Yet should it really be left to the corporate sector to be shamed into pursuing these social purposes? These surely should be matters for public policy, not corporate charity.

According to Department of Business and Enterprise figures, Britain has the lowest prices for gas within the EU, ignoring the eastern European accession nations which still have access to fixed-cost Russian sources of supply. We are also among the lowest for electricity.

Yet the best-placed country by far for the overall price of energy is France, which through the 1970s and 1980s invested heavily in nuclear and is now sitting pretty as it enjoys the fruits of abundant electricity produced at now relatively low fixed costs. By contrast, Britain squandered the blessing of North Sea oil and gas while the price was low and is now increasingly reliant on ever more highly priced imports.

Nor is the massive programme of investment in renewables demanded by the Government going to make the situation any better, at least in the medium term. In terms of upfront capital spending, wind is one of the most expensive power sources of the lot, and it is all going to be paid for through rising fuel bills.

Any windfall tax would be likely to result in higher prices still, while at the same time discouraging the foreign and indigenous investment that needs to be made in Britain’s energy future. There’s no telling what a government as much on the ropes as this one would do in the search for populist measures to improve its fortunes. But I can think of only one reasonable way of extracting more money from the industry so as to apply it to lower bills for the needy. This would be to increase the auctioning of emission permits from the present 7 per cent to the maximum of 10 per cent allowed under the present phase of the European emissions trading scheme.

The cost of carbon is already priced in to the wholesale markets, so there would be no justification in generators seeking to pass on whatever they had to pay for extra permits. Whether a Government as profoundly strapped for cash as this one would in practice recycle these extra revenues to the fuel poor, or just sink them into the general pot, is an interesting question.

Is Lloyds TSB’s strength now its weakness?

Whether by design or necessity, Lloyds TSB has so far managed to avoid the worst pitfalls of the credit crunch. Eric Daniels, the chief executive, is a deeply cautious banker out of the old school, so he would no doubt claim it was sound judgement rather than good fortune that kept him from the bear traps.

While everyone else was off chasing the spoils of securitisation, he just stuck to his knitting, ploughing a lonely and apparently uninspired furrow in conventional retail and commercial banking. If everyone had done the same thing, perhaps we wouldn’t be in the mess we are today.

Yet Mr Daniels’ reticence was also because, having overpaid for Scottish Widows and ground costs in the core bank down to the bone, Lloyds TSB emerged into the new century a deeply constrained beast with nowhere to go except sideways. Even if it had wanted to, it couldn’t have indulged to the same degree as others in the wild west-ern frontiers of investment banking and structured credit. So why have the shares performed almost as badly as everyone else’s in the banking sector, and actually rather worse so far this year? Despite an increase in the dividend and the bank’s insistence that it is uniquely well placed for a low-growth environment (well, everyone’s got to be good at something, haven’t they?), the shares took a further beating yesterday.

The most obvious explanation is the headline 70 per cent plunge in statutory profits. Yet looking beneath now familiar writedowns on structured credit, and the effect of adverse insurance volatility, the performance was reasonably good, with strong growth and apparently none of the funding difficulties which have beset other banks.

Unfortunately, the effect of this growth has been quite significantly to impair the core, tier one capital ratio to just 6.2 per cent. What’s more, conventional bad debt experience is on the rise, both in mortgages and commercial banking. Again, the group attributes most of this rise to growth, rather than recorded defaults. Yet it readily admits that things are bound to get worse, and what really worries investors is that because of Mr Daniels’ caution, Lloyds TSB is today an almost exclusively UK bank, making it highly vulnerable to a prolonged UK downturn.

The decision to increase the dividend suggests Lloyds is confident of weathering the storm. But we’ve already seen such sanguine thinking shatter-ed among other banks, which having only recently raised their dividends have since been forced to abandon them entirely and raise new capital.

All the same, for those who believe, as I do, that the downturn won’t be quite as bad as the headlines suggest, Lloyds looks a reasonable bet. Analysts have been predicting a dividend cut at Lloyds TSB for as long as I can remember, yet somehow or other, the bank has always managed to keep the payouts coming.

The present yield at more than 11 per cent again suggests an unsustainable level of dividend going into the future. Either the stock market or the management have got it wrong. Which one it is should be apparent by the end of the year, but just remember those words, “well positioned for a low-growth environment”. We’ll find out soon enough.

News reported by The Independent

Broadcasting giant BSkyB today reported its highest level of new customers for five years in a sign that hard-pressed consumers are choosing to stay in and spend more on home entertainment.

The pay-TV group posted a better-than-expected hike in net customer additions in its fourth quarter, at 92,000, taking total customers to 8.98 million.

It also revealed an improvement in customer loyalty as its rate of churn – those leaving the group – fell to 9.8 per cent, down from a peak of 13.7 per cent the previous year.

But BSkyB shares fell more than 4 per cent in early trade as it reported a 2 per cent drop in adjusted operating profits to £752 million in the year to June 30, which was slightly below market expectations.

News reported by The Independent

Some 16 million customers of British Gas face huge increases in their bills after the country’s biggest home energy provider announced price rises of up to 35 per cent yesterday.

From today, British Gas is raising the price of its gas by 35 per cent, while customers buying electricity from it will pay 9.4 per cent more. Households who buy both services from the utility will see their dual fuel bills rise by 25 per cent.

The increases mean the average household’s dual fuel bill will rise from £1,055 a year to £1,322.

Energy analysts pointed out that before the 15 per cent increase in costs implemented by British Gas in January, the typical household was paying £912 a year. Yesterday’s price rise means British Gas’s bills have now risen by 45 per cent so far this year.

However, the energy group said it had no option but to raise its prices following an increase in the cost of gas on the wholesale markets of almost 90 per cent since last winter.

“We very much regret that we have had to make this decision at a time when many household budgets are already under pressure,” said Phil Bentley, the company’s managing director. “The simple fact is, though, that we have entered an era of unprecedented high world energy prices.”

Centrica, British Gas’s parent company, owns substantial gas reserves, but only supplies a quarter of its retail arm’s needs and is, in any case, prevented by regulators from subsidising the unit’s prices. The company is due to unveil its interim results in full today, but revealed last night that profits at British Gas fell to £166m during the first six months of the year, 69 per cent down on last year’s figure.

Mr Bentley said that without today’s price increases, British Gas would lose several hundred million pounds in the second half of the year.

The company is desperate to refute accusations that it is profiteering, particularly in the face of growing calls for a windfall tax on the energy industry, and yesterday reiterated its promise to spend £43m over the next 12 months on “fuel poor” customers struggling to pay their bills.

British Gas also promised it would make no further increases this year to the bills of customers on its standard tariffs.

But analysts said the company might have to make further price increases early in 2009 and warned that its main rivals were certain to announce similar price increases for their own customers.

Aside from British Gas, of the next five biggest home energy suppliers in the UK, only EDF has so far raised its prices this summer, announcing increases of up to 22 per cent last week. Scottish & Southern has already warned that higher bills are imminent, while ScottishPower, E.On and npower are expected to fall into line within weeks.

“The difference between the main suppliers on price has been and will remain very small,” said Joe Malinowski, the chief executive of The Energy Shop. “There is no question that the other providers will follow these moves.”

Mr Malinowski expects most providers, including British Gas, to raise their prices again in January or February of next year unless there is a substantial fall in the cost of wholesale gas in the meantime.

The soaring cost of fuel bills has prompted calls for the Government to review regulation of the energy industry, the structure of which was heavily criticised by MPs sitting on the Business and Enterprise Select Committee this week. Ministers are also under pressure to do more to help low-income households caught out by the price rises.

However, energy companies insist that Britons pay lower home energy bills than consumers in most other countries in Europe. The most recent figures from the Department of Business and Enterprise show that, at the end of 2007, UK domestic gas prices were the fourth lowest in the European Union and electricity prices were the eighth lowest. While prices have risen since the end of last year, there have also been increases on the Continent.

Nevertheless, Brendan Barber, the general secretary of the Trades Union Congress, called for a rethink of the Government’s energy policy. “The UK’s coal reserves must be allowed to play a bigger part in our energy mix,” he said. “Coal would give UK consumers and industry more stable and secure energy prices, rather than the volatility we are now witnessing.”

Gordon Lishman, the director-general of Age Concern, said: “It is absolutely unacceptable that around 2.25 million pensioner households are now living in fuel poverty, and thousands more will soon be facing the same fate. As an emergency measure to help alleviate the problem this winter, the Government and energy companies should be working together to offer ‘fuel vouchers’ to the poorest pensioners.”

Economists warned that the latest round of price rises would also be a further blow to the Bank of England’s attempts to bring inflation back to its 2 per cent target rate. Philip Shaw, an economist at Investec, said energy suppliers were increasing bills by more than expected, making it likely that inflation would rise even more significantly above the current level of 3.8 per cent.

“[This] increases the chances that inflation will hit 5 per cent over the autumn,” Mr Shaw warned. Such a rise would prompt calls for a rise in interest rates, putting additional pressure on many households’ budgets.

News reported by The Independent

Employers are to be banned from using tips and service charges to “top up” staff pay to meet the minimum wage, under government plans.

The changes, set to come into force next year, will benefit those working in industries such as restaurants, where tipping is commonplace.

Firms are currently allowed to divert service charges into takings.

Unions have welcomed the move, saying that not allowing employees to have tips in addition to pay is an “abuse”.

The national minimum wage, currently £5.52, rises to £5.73 on 1 October.

‘Common sense’

Business Secretary John Hutton said there needed to be more transparency in tipping.

“Waiters and waitresses across the country have been hungry for the tips loophole to be closed and the announcement today will satisfy their appetites”< strong> Derek Simpson Unite

He called on employers to make it clear how tips were distributed so that customers knew where their money was going and whether or not the establishment operated a fair tipping policy.

“Hundreds of thousands of people in the UK have jobs in sectors where tipping is commonplace,” Mr Hutton said.

“When people leave a tip, in a restaurant or elsewhere, they expect it to go to service staff and as consumers, we’ve got a right to know if that actually happens.

“This is an issue of fairness and common sense, and it’s one many people clearly care a lot about.”

‘Vulnerable workers’

Unions, which have argued that the current law is unfair, have welcomed the move.

UK restaurants are accused of not being upfront about staff tips

“Waiters and waitresses across the country have been hungry for the tips loophole to be closed and the announcement today will satisfy their appetites,” said Derek Simpson, joint leader of the Unite union.

“It is great news that unscrupulous employers will no longer be able to use the tips left for staff to subsidise low wages.”

The union intends to introduce a Fair Tips logo in bars and restaurants across the UK – showing that staff receive at least the minimum wage as well as all tips.

TUC General Secretary Brendan Barber said that presently “unscrupulous” employers could “cheat” workers out of tips that were meant for them.

“The government is right to make sure that workers can keep their tips and that the responsibility to pay the minimum wage rests squarely with employers,” he said.

“This is a welcome example of the government responding to the concerns of hard-pressed, vulnerable workers.”

GMB General Secretary Paul Kenny said its members in the hotel and catering industry had fought a 10-year campaign to end tips being counted towards their pay.

“Far too many rogue employers have been using tips to make up the national minimum wage,” he said.

“The quicker this is ended completely the better.”

News reported by The BBC

British Gas owner Centrica has seen operating profits decline 20% in the first six months of the year, following increases in wholesale gas prices.

Profits fell to £992m from £1.23bn a year earlier.

Despite the drop in earnings, Centrica said it would raise its dividend to 3.9 pence a share from 3.35p.

A day earlier Centrica said British Gas would increase gas bills by 35% with immediate effect in a bid to restore “reasonable profitability”.

Centrica chief executive says prices had to rise to support a sustainable business
Centrica said the results were “good” given the tough market conditions.

The company’s shares added 1.7% in London following the earnings news.
Centrica said it was obliged to raise gas prices in light of dwindling reserves and higher oil prices that had pushed up costs.

Centrica’s move to increase prices on Wednesday came after EDF Energy raised prices last week. Analysts say other firms are likely to follow suit.

Phil Bentley, managing director of British Gas told the BBC: “The price of gas for this winter, even though it’s fallen a little bit, it’s still double what was last year”.

News reported by The BBC

Deutsche Bank has written down another 2.7bn euros ($3.6bn; £1.8bn) between April and June, taking its credit crunch bill to more than 7bn euros.

Unlike many of its global rivals, Deutsche Bank managed to make a profit in the quarter even after the problems.

Pre-tax profits came in at 642m euros, well down on the 2.7bn euros it made in the same period a year earlier.

Almost half of the write-downs were caused by investments in assets that were backed by residential mortgages.

Exposure to monoline insurers, which guarantee the repayment of a bond if its issuer is unable to do so, as well as under-performing investments in commercial property, made up much of the rest of the write-downs.

“The second quarter of 2008 proved to be another very challenging quarter for the banking industry,” said chief executive Josef Ackermann.

“We remain cautious for the remainder of 2008.”

The credit crunch began in the US where it was sparked by record defaults on sub-prime mortgages. Sub-prime lenders provide financing to people with poor or non-existent credit histories.

It later emerged that many European banks had bought repackaged bundles of debts which were linked to US residential mortgages.

Some of the European banks have now been hit as hard as their US counterparts in terms of losses from the credit crunch.

News reported by The BBC

UK banking group HBOS has seen profits before tax fall 72% in the first six months of the year, amid a credit crisis and a tougher economic climate.

The firm said first-half profits dropped to £848m from £2.96bn in the same period a year earlier.

Bad debts rose 36% to £1.31bn as customers failed to repay loans.

But the firm, which recently completed a £4bn share sale, said it was better placed to operate in the “more challenging economic environment”.

Mortgage defaults

Despite the drop in profits, HBOS shares rose nearly 8% in early trading in London, with analysts voicing cautious optimism about its earnings report.

“Probably the most worrying trend is a rise of £225m in charges on mortgages where the borrowers are having trouble keeping up the payments” Robert Peston, BBC business editor

Robert Peston, the BBC’s business editor, said the HBOS results might have sounded dreadful, but the drop in earnings was only slightly more than was reported on Wednesday by UK banking rival Lloyds TSB.

A day earlier Lloyds TSB said profits had fallen 70% to £599m because of the global market volatility, down from a profit of £1.99bn in first half of 2007.

Our correspondent said “probably the most worrying trend was an increase of £225m in charges on mortgages where the borrowers were having trouble keeping up with their repayments”.

HBOS said the value of mortgages it classed as being impaired had risen 21% to £5.1bn.

Losses on loans and advances increased by 36% to £1.3bn in the first half.

Wider slowdown

The firm said the problems seen in UK and global financial markets during the first half of 2008 had evolved into a “wider economic slowdown” after access to funds had become more limited and more expensive.

HBOS said its underlying profits before tax including some accounting adjustments were down 51% at £1.45bn during the first six months of 2008.

Richard Hargreaves of Hargreaves Lansdown Stockbrokers said: “Concerns still linger in the form of the group’s exposure to the UK environment and, in particular, the buy to let market in which Halifax is a major player.”

“Further disposals of assets have not been ruled out of the price is right, and if the economic landscape deteriorates sufficiently.

HBOS recently launched a rights issue in a bid to improve its balance sheet, but only 8.29% of the new shares offered in its £4bn rights issue were taken up.

News reported by The BBC

Royal Dutch Shell has reported another increase in three-month profits thanks to rising oil prices.

April to June profits came in at $7.9bn (£4.0bn) on a current cost of supply basis, which is 4.6% up on the same period of 2007.

Shell said high oil and gas prices had made up for difficult conditions facing its petrol stations and refineries.

There was no mention of the effects of the four day strike by tanker drivers that disrupted supplies in June.

The drivers eventually accepted a 14% rise in pay over two years.

“Good operating performance, combined with increased oil and gas prices, offset the impact of weaker downstream conditions,” said Jeroen van der Veer, chief executive of Royal Dutch Shell.

Downstream trading includes activities such as marketing, petrol stations and refineries.

The Anglo-Dutch company is the world’s second largest publicly owned energy company by stock market value.

News reported by The BBC

UK house prices showed their biggest annual fall since the Nationwide began its housing survey in 1991.

The 8.1% annual decline came after house prices dropped by 1.7% in July, the building society said.

The average home now costs £169,316 which is nearly £15,000 cheaper than in the same month last year.

The Nationwide survey found that house prices have fallen for nine months in a row and were at their lowest level since August 2006.

Property prices were still £11,000 higher than three years ago, the survey found.

“The weakening economy and poor housing market sentiment do not suggest that the market will recover quickly,” said Fionnuala Earley, Nationwide ‘s chief economist.

Sellers were remaining reluctant to accept lower offers, which along with lack of availability of mortgages was pushing down house purchase activity.

‘Belt tightening’

Ms Earley said that consumers are tightening their belts in the current climate.

But she added that swap rates – the key driver of mortgage rates – had fallen slightly, which had allowed new fixed rate mortgage deals to come down in cost.

“As the cost of mortgages begins to come down, activity could be bolstered and restore some liquidity to the housing market,” she said.

“However this is not expected to happen overnight.”

If oil prices continued to fall, this could increase the possibility of rapid cuts in interest rates, which she described as good news for borrowers.

Ms Earley said that sharp rises in food and fuel prices were having a “double edged” effect of pushing up inflation while slowing the economy by squeezing disposable income.

This would also point to an eventual interest rate cut by the Bank of England’s Monetary Policy Committee, she said.

Mortgage changes

The figures come shortly after the Bank of England said that the number of new mortgages approved for house purchases in June was at its lowest level since 1999.

Prices are now £17,000 lower than at the peak of the market

The number of home loans approved in June fell to 36,000, down from 41,000 in May, the Bank said.

But the National Housing Federation said that it was expecting house prices in England to rise by 25% by 2013.

It said that the number of new homes being built was not keeping up with rising demand as a result of people living longer, getting married later and getting divorced more.

There also has been an increase in fears that many people will fall into negative equity, with the value of their house dropping below the value of their mortgage.

The Nationwide figures show that the average price of a UK home has fallen £17,000, or 9%, since their peak of last October.

This means that anyone who took out a 90% loan-to-value mortgage last autumn will now have almost of the equity they put into their properties wiped out.

News reported by The BBC

Do you run a care business and are you looking to sell it?

We run a care business that specialises in live-in care and we are looking to expand by purchasing other businesses in the same industry.

Our preference is that you also have mostly live in clients in your business.

Please contact us on russell@careathome.org and rest assured we will be as discreet as is necessary.

Alternatively, post a comment on here for me to contact you.