UK Edition
A planned payment strike by consumers over soaring energy bills could force regulator Ofgem to raise the price cap higher than current predictions.
The New Economics Foundation, a think tank, said a mass refusal to pay energy bills would either force the Government to intervene, or prompt energy companies to pressure Ofgem into raising the price cap faster than expected.
MoneySavingExpert founder Martin Lewis warned earlier this week of "civil disobedience" as energy bills spiral. He raised the prospect of many customers refusing to pay their bills.
Don’t Pay UK, an amateur organisation, urged its 7,000 Twitter followers to withhold payment starting from October 1, when the price cap is expected to rise to more than £3,200.
A spokesman said the group membership was increasing by 300-700 members a day.
“We are aiming for one million to pledge to strike by October 1,” he said. “It’s a big number but it matches the scale of this crisis. Around one million are already in arrears, two million currently can’t even afford either heating or eating, and one in three households will be in fuel poverty if this rise goes ahead.”
But Chaitanya Kumar, of the New Economics Foundation, said a mass refusal to pay could have the opposite effect. It would only take 6,000 taxpayers withholding energy bills for a “ripple effect” to be felt by energy providers, Mr Kumar said.
“The balance sheets of these companies were already quite poor and could get worse,” he added.
“I’d imagine suppliers’ accounts would start haemorrhaging quite a bit. Ofgem increased the price cap primarily to protect suppliers, so if people just stopped paying, the Government would have to intervene.”
Without Government intervention, suppliers would likely pressure regulator Ofgem into raising the price cap even further to mitigate losses, Mr Kumar said, leading to a “vicious cycle” of potential further protests.
Mr Kumar urged the Government to avoid the “havoc” a protest would cause. “Someone somewhere has to pay and governments are in a better position to cover those costs rather than expect individuals to do so,” he said.
Appearing on ITV’s Peston show on Wednesday night, Mr Lewis said there was a “big movement of people calling for a non-payment of energy bills”.
Any protest would be reminiscent of 1990’s “poll tax” riots. The reform, put forward by Margaret Thatcher, would have seen a 300-year-old “rates” system – wherein taxpayers paid a rate based on the estimated value of their home – swapped for a flat-rate community charge, dubbed a poll tax, which would see taxpayers pay a fixed rate set by their local authority.
Riots broke out across the country following accusations the tax would save the rich money and move expenses onto the poor.
In 1991, then Prime Minister John Major announced the poll tax would be replaced by council tax, which came into effect in 1993.
A spokesman for Don’t Pay UK urged the Government to take action before the planned protest. He said: “If it’s not, then we expect the level of civil disobedience to spread and turn into a political crisis for the Government much like the poll tax became for the Thatcher government.”