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Will Ofgem’s new proposals to refund credit balances save you money or will bills go up?

Voice Of EU



Proposals that could see energy credit balances of around £1.4billion automatically returned to households has been criticised by an industry insider who says the move is simply addressing the symptom but not the root cause.

Under new plans from Ofgem, suppliers could be limited to the amount of customer credit balances they can hold, which the regulator says could result in as £65 per household on average being returned.

However, an industry insider said the plans have only been put in place due to direct debits being far too high for customers in the first place.

They believe the regulator has made the decision to return credit balances as it suspects some suppliers are holding excessive credit balances to fund their tariffs or cover debt.

Whilst Ofgem's proposals look to return money to customers, it could result in bills going up

Whilst Ofgem’s proposals look to return money to customers, it could result in bills going up

Ofgem’s proposals will mean suppliers can retain credit balances that are enough to cover their customers consumption through the winter but no more.

This can be achieved if customer’s direct debits are at the correct level – however, many aren’t and suppliers that currently need higher direct debits to fund their cheap tariffs would be deemed non-compliant if the suggested changes go through.

Under the new rules, they will then have to increase the price of their tariffs to cover their debt, which reduces credit balances, or be forced to refund the money by the regulator.

It is thought the latter is unlikely to happen as some suppliers simply won’t have the cash to do so and will therefore likely go bust.

As such, the remaining suppliers pick up the cost of credit balances and, ultimately, will have to increase prices meaning bills go up.

Refunding thousands, if not millions, of pounds will be difficult for a number of suppliers after many faced a difficult financial year as they had to help support customers who could no longer pay their bills. 

At present, the average profit margin for suppliers is -1.4 per cent, highlighting the struggle many face, especially after the pandemic. 

The insider said: ‘Suppliers are actually loss making and not sitting on lots of cash and so the reality is likely that zero will be returned to customers and the cheapest tariffs will disappear.’

They added Ofgem did not consult providers about these plans before announcing them, leaving many providers wondering how they would stump up the money the regulator is asking for. 

Suppliers could be limited to the amount of credit balances they can hold, Ofgem's plans say

Suppliers could be limited to the amount of credit balances they can hold, Ofgem’s plans say

This is Money asked Ofgem how it calculated that £1.4billion would be returned to customers. 

It said its research found as much as £1.4billion was held in surplus credit balances in October 2018, a figure based on suppliers holding £2.4billion in fixed direct debit credit balances in total. 

To calculate what was and was not surplus, it requested information from suppliers on what their fixed direct debit customers’ consumption was in each month of the year as a proportion of the entire year.

From this, it modelled what credit balances were required in each month and compared this to what suppliers were actually holding.

A spokesperson for Ofgem said: ‘For suppliers doing the right thing and only collecting the credit balances they need, our proposals will not affect them.

‘Where suppliers are currently relying on surplus credit balances – and let’s be clear that is consumer overpayment – to sustain their business, they will face the cost of the risk they are putting onto the rest of the market.

‘This will mean they have less access to working capital and our proposals will bite on them.’ 

It said its consultation also includes a credit balance threshold to limit the total amount of credit balances suppliers can hold at set points during the year, again to stop over collection.

Suppliers would be required to protect any credit balances they collect above the threshold, such as through an escrow account or some form of financial guarantee.

This is Money also asked whether it would be more beneficial for energy suppliers to ensure they set direct debits at the correct level to begin with to avoid a massive debit.

Many are on estimated bills that mean they are either underpaying or overpaying.  

Ofgem said suppliers must currently set fixed direct debits based on the volume of energy they expect the customer to use over the year.

They must base this estimate on the best and most accurate information available to them including the most recent meter reading.

Ultimately, if the proposals are confirmed and go ahead, the regulator said it will work with suppliers during the implementation period adding it has ongoing conversations with all suppliers to ensure they are compliant with regulations.

If suppliers fail to abide by the regulation, it says it can step in and take formal action. This can start with a fine and if non-compliance continues, ultimately it could lead to the regulator revoking their licence.

Again, this could lead to less providers in the market meaning less competition and higher prices. 

The insider said: ‘The new plans are addressing the symptom and not the root cause. It is a vicious cycle that is getting worse.’

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Facebook admits high-profile users are treated differently

Voice Of EU



Facebook’s oversight board said the social media company hadn’t been “fully forthcoming” about internal rules that allowed some high-profile users to be exempt from content restrictions and said it will make recommendations on how to change the system.

In the first of its quarterly transparency reports published Thursday, the board said that on some occasions, Facebook “failed to provide relevant information to the board,” and in other instances the information it did provide was incomplete.

For example, when Facebook referred the case involving former US president Donald Trump to the board, it didn’t mention its internal “cross-check system” that allowed for a different set of rules for high-profile users.

Facebook only mentioned cross-check, or XCheck, to the board when asked whether Trump’s page or account had been subject to ordinary content moderation processes.

The cross-check system was disclosed in recent reporting by the Wall Street Journal, based in part on documents from a whistle-blower.

The journal described how the cross-check system, originally intended to be a quality-control measure for a select few high-profile users and designed to avoid public relations backlash over famous people who mistakenly have their posts taken down, had ballooned to include millions of accounts.

The oversight board said it will undertake a review of the cross-check system and make suggestions on how to improve it.

As part of the process, Facebook has agreed to share with the board relevant documents about the cross-check system as reported in the Wall Street Journal. – Bloomberg

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Green mortgages may leave owners of older homes unable to sell

Voice Of EU



Estate agents warn owners of older homes, rural houses and listed properties could struggle to sell under green mortgage plans

  • Boris Johnson has unveiled his plans for turning Britain green by 2050 
  • The plans include proposals on how to make the housing stock greener 
  • The plans would see lenders disclose the energy performance of properties

Homeowners living in older, rural and even listed properties risk being unable to sell if strict green finance targets are introduced, estate agents have warned.

The warning comes after Boris Johnson unveiled his plan for turning Britain green by 2050 this week, with mortgage lenders having targets for the energy performance of properties in their portfolio.

A body that represents estate agents across Britain claimed that the property market could be distorted as a result of the measures and called for Britain’s historic housing stock to be taken into account.

Boris Johnson revealed proposals on how to make the housing stock greener this week

Boris Johnson revealed proposals on how to make the housing stock greener this week

Timothy Douglas, of Propertymark, said: ‘Incentivising green improvements to properties via lending creates risks of trapping homeowners with older properties, those who live in rural areas, listed buildings or conservation areas, making their homes difficult to sell and therefore reducing the value.’

Propertymark said that those living in older properties could be left with homes that they could not sell if buyers were unable to secure finance on them due to their lower energy efficiencies.

The effect would be likely to be felt more by less wealthy owners, as deep-pocketed buyers would be more able to overlook mortgage restrictions and high-end older homes would continue to be desirable.

Mr Douglas said: ‘The use of targets could distort the market and sway lenders towards preferential, newer homes in order to improve the rating of their portfolio.

‘Stopping a large portion of housing stock from being able to enter the market could cause havoc for home buying and selling as well as the wider economy.’ 

He added that improving the energy efficiency of homes should be reliant on consumer choice and not something enforced by mortgage lenders, with all the knock-on effects this could entail.

He said: ‘We would be concerned if lenders raise rates and limit products because fundamentally, improving the energy performance of a property is reliant on consumer choice and it is not the core business of mortgage lenders.’

Mark Harris, of mortgage broker SPF Private Clients, said: ‘The green agenda is not new but there is increasing impetus behind it. There are more green mortgage products aimed at those purchasing more energy-efficient properties – A-C rated, and not just from specialist lenders but the high street banks too.

‘However, there is a real danger that green initiatives could create the next round of mortgage prisoners if homeowners are trapped in older homes that can’t be improved, so they can’t move because they can’t sell them on.

‘Without changes or improvements, lenders may restrict lending to lower loan-to-values, higher pricing, or not lend at all. This could penalise those who are unable to adapt to or adopt new efficient technologies economically.’

A UK Finance spokesperson said: ‘Greening our housing stock is vital if we are to meet our climate change obligations and banks and finance providers are committed to helping achieve this goal and making sure consumers are not left behind.’

Ways to boost energy efficiency  

Propertymark recommends three measures to improve the energy efficiency of homes without negatively impacting the housing market.

1. Improvements linked to an EPC

These include linking a plan for energy efficiency improvements to the recommendations on a property’s Energy Performance Certificate.

It could demonstrate the ‘most suitable route’ to a warmer home, regulatory compliance and zero carbon, according to Propertymark.

2. Tax breaks

It also recommends using tax breaks to incentivise homeowners to finance energy efficiency improvements.

For example, these could include making energy improvements exempt from VAT or offering lower rates of council tax for homes that have been made more energy efficient.

3. Adjustable tax rates

An adjustable rate of property tax that is tied to energy performance is also being recommended by Propertymark.

This could be done in two ways, it suggested. First, by applying the adjustment as a reduction on more energy-efficient properties. And second by offering rebates to buyers if energy efficiency improvements are made to less efficient properties within a certain time period after purchase.

Propertymark said that by linking energy performance with property taxes, this could help introduce increased saleability for more energy-efficient properties. In addition, it suggested that improvements would become standard for homeowners seeking costs and improve the desirability of their homes.


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Johnson rules out face masks as UK’s daily Covid cases rise above 50,000

Voice Of EU



Daily coronavirus cases in Britain have risen above 50,000 for the first time since July, but Boris Johnson said he will not bring back compulsory face coverings or introduce vaccine passports.

Speaking in Northern Ireland, the prime minister said his government was holding firm to its policy of no legal restrictions introduced in July, but was watching the numbers carefully.

“The numbers of infections are high but we are within the parameters of what the predictions were,” he said. “We are sticking with our plan.”

Mr Johnson acknowledged the “patchiness” of Britain’s vaccination programme, urging people to come forward for their booster jabs as soon as they are invited to do so. But Labour leader Keir Starmer said the government should beef up the programme, ensure that more children were vaccinated and aim to deliver half a million jabs a day.

“The government said that the vaccine would be the security wall against the virus and now the government is letting that wall crumble,” he said.

“We’ve seen those that most need it not able to get the jab they need. Only, I think, 17 per cent of children have got the vaccine. And the booster programme has slowed down so much that at this rate we’re not going to complete it until spring of next year. So the government needs to change these, it needs to get a grip. I think it needs to drive those numbers up to at least 500,000 vaccines a day.”

Vaccine passports

The British Medical Association (BMA) accused the government of “wilful negligence” in not bringing back some restrictions, and of failing to learn the lessons of a parliamentary report last week about its handling of the pandemic. The association’s chairman, Chaand Nagpaul, said doctors could say categorically that it was time to bring back compulsory face masks and to introduce vaccine passports.

“By the health secretary’s own admission we could soon see 100,000 cases a day, and we now have the same number of weekly Covid deaths as we had during March, when the country was in lockdown,” he said.

“It is, therefore, incredibly concerning that he is not willing to take immediate action to save lives and protect the NHS. ”

Health secretary Sajid Javid warned this week that some restrictions could be introduced if the public failed to exercise caution and to take up vaccination offers. He acknowledged that Conservative MPs could show an example by wearing masks in the House of Commons, but house leader Jacob Rees-Mogg on Thursday rejected the suggestion.

Crowded spaces

“There is no advice to wear face masks in workplaces. The advice on crowded spaces is with crowded spaces with people that you don’t know. We on this side know each other,” he told the SNP’s Pete Wishart.

“Now, it may be that he doesn’t like mixing with his own side, wants to keep himself in his personal bubble. He may find the other members of the SNP – who I normally find extraordinarily charming…but we on this side have a more convivial fraternal spirit, and for our calling the guidance of her majesty’s government.”

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