What should the government do about rising energy prices?

Paul Johnson

Welcome everyone to this edition of the IFS Zooms In with me Paul Johnson. And I’m delighted to be joined today by Giles Wilkes who is a senior fellow at the Institute for Government and, very importantly for what we are going to be talking about today, he was an advisor to Theresa May on industrial and economic policy and prior to that, an advisor to Vince Cable on energy policy among other things.

I’m also joined by Stuart Adam who is a senior economist at the IFS who knows more possibly than anyone else in the country about tax and welfare policy. And the two things that bring Giles and Stuart together today is for us to be looking at some aspects of the current cost-of-living crisis as its being called, and in particular what’s been happening to energy prices and on what government might do to mitigate some of the consequences for households.

Now obviously there is a lot more going on in terms of our cost-of-living crisis than just what’s happening to energy prices, all sorts of other prices are rising as well and of course we’ve got some pretty chunky tax rises coming in in April. But let’s start with this issue of what’s happening with the cost of our gas and electricity. Giles, perhaps you could start just by giving us a sense of scale. I mean how much are our energy bills rising and how does that relate to experience over the last, you know, many years?

Giles Wilkes

Well, a great place to start Paul, and thanks for having me on here. Now the way we normally try to understand it is to translate this into ordinary household budgets which is something the IFS is obviously an expert in doing, and the typical figure we’re used to discussing is that the typical household spends about a £1100/£1200 per year on their energy, split roughly fifty/fifty between gas for their heating and electricity for heating everything else. And this goes up and down all the time depending on the wholesale cost of gas mostly, because that’s one of the biggest components both in the heating part, but also in generating electricity.

Now it would normally vary between, I don’t know, £1100 and £1300 and since we brought in the price cap at the beginning of 2019, that’s a calculation Ofgem would look at quite carefully and move it around, £50 would be a big deal. I say all of that as context, because what’s been widely expected is that the next time Ofgem have to make that calculation, that price will have to move from between £1300 to £1800, £1900, a gigantic increase. And for some people, I’d like to make this point because I include myself amongst these, it's going to be a lot more because previously they weren’t on the price cap, they might have been on a favourable teaser rate that encouraged them to join a seemingly good value energy company. And so, they’re first going to rise to a normal price and then to one of these higher capped prices. So, you might see some people seeing sixty, seventy, eighty percent increase in their energy bills. Which is going to be unprecedented.

Paul Johnson

And those are quite extraordinary numbers, and it would be good to unpack some of what you said. Immediately we get into the complexity of the energy market. I think I saw something that you wrote which, in numbers that I also understand suggested that households might go from spending about thirty billion a year on their energy to something like forty billion a year on their energy bills. But you went through a series of issues there in terms of how energy bills work; can you just explain this price cap mechanism? A lot of commentary has been focused on that, it’s something that implies almost the government is setting energy bills and some we believe even blamed it for the increases in bills. Can you just tell us a little bit about what that cap is, how it works and why we’re expecting the big increase in April?

Giles Wilkes

Well, great question. I mean the punch line is the energy cap is going up but it’s not because of the energy cap that bills are going up. But people will see the government, in a sense Ofgem, the regulator for the government, putting up that cap and will naturally blame it. So, it’s a good question to ask and to bring some clarity to. Now it looks very simple to a household you just turn off, on and off your gas or electricity and it comes out. The price itself is made-up of lots of different chunks, and some are fixed costs that really don’t vary very much month on month or year on year; just as the network costs for all the pipes and wires out there, getting it from the generator to your household; the cost we pay for extra social obligations like lowering the bills for some of the less well off, and I think Stuart will be better placed to talk about that.  

And then some of them are slightly more variable like how much it costs to run the energy company; and then there’s the highly variable part, which is the wholesale price of electricity or gas. And that is set essentially on an open market out there with all sorts of different generators, all sorts of different sources of gas. And that’s the one that can move greatly and that’s the one that’s moved enormously over the last six months or so.

So, Ofgem, by the way, has an excellent explainer on their website. You can go there and see it broken down in nice, neat bar charts. But essentially what we’ve seen is the component of that that comes from the whole sale prices, according to some estimates now is expected to go from around £500 of that cost, that £1300 cost, is going to be raised to £990 is what people think at Carbon Brief, the think tank, and that might even rise further to £1200. So, the major driver of the increase in cost is the increase in wholesale prices.

And those wholesale prices, for nearly every country in the world, are something they can’t control, they come from open market in gas and, hence the electricity price. So, a slightly complicated answer for you there but most of the cost is something that isn’t about, directly, policy.

Paul Johnson

Okay so this isn’t the fault of government for layering too many costs onto us, or overregulating or getting the price cap wrong, it’s because gas prices have gone up internationally. Can we push that one step further, why have gas prices gone up such an extraordinary amount?

Giles Wilkes

That’s a good question and I would say there are elements of the policy side that have contributed to it, but it’s more in the tens of pounds than the hundreds of pounds, I should make that clarification and fess up to a particular part later. But why is the gas prices gone up so much? Well some of this is COVID related, gas demand was crushed by the original phases of the pandemic and then it rebounds really quickly after low periods of maintenance, low amounts of storage. So, you see a really fast snap back, like we’ve seen in quite a lot of markets, but more extreme in the gas market.

Other is sheer bad luck, people talking about the perfect storm, well in fact Europe that’s increasingly dependent on wind has had a less windy summer, which has meant that the wind turbines haven’t been providing as much of the energy through the Summer which means the gas storages have been hit harder, so the gas supplies are less full. Then there’s demand from Asia which is also rebounded quite hard and is a big manufacturing hub.  

But also, the UK has particular vulnerabilities. In particular, we have a pretty poor housing stock, we have very leaky uninsulated houses compared to the typical ones in Europe in particular. And we use a lot of gas for central heating. Which for along time was a boon when we had the North Sea just pumping it straight to us, but now it’s become a bit of a vulnerability. So, a lot of these things have come together. And I suppose you’ve also finally got the geopolitical factor, Russia not pouring gas into the system for reasons that a lot of people suspect is political and diplomatic rather than purely economical.

Paul Johnson

So that all sounds quite concerning, but how much of that is going to continue into the medium run? Because that all matters for actually how government should respond to this. Is this a one-off spike which will get prices going back to pre-pandemic levels fairly quickly? Is this a spike that will stay there or will we continue to see huge further increases? I mean I know no one can foresee the future, but what’s the consensus on whether this is a long-term increase or whether we’ll see a fall back relatively soon?

Giles Wilkes

Well, I’d first like to amplify your caveat there that nobody can easily predict a massive and relatively liquid market. Otherwise, you could make a lot of money and there are energy traders all trying to get this. I think future prices, prices where you can actually get in advance a fixed price, suggest that it’s not going to come down as fast, and some of the market inflation that we’ve seen right now will just return the moment sort of COVID’s passed through the system. People don’t think that it’s going to necessarily return that quickly, and it takes a long time to rebuild those stocks and so forth. So there might be considerable persistence I think is one of the consensus, twelve months, eighteen months.

But beyond that, it’s really hard to tell. I mean commodity markets are by their nature very volatile and cyclical, because people see a really high price, they invest in getting a lot more supply, that supply takes months or years to come on, and by the time it does there’s a glut and then it goes down again. You might remember this over the finically crisis, we saw oil up to 147 and then down to 30 and then back up to 1120 around the Arab Spring and it fell down to 30 again after a collapse in 2016 - they’re very volatile. So, you’d be a very brave man to put a lot of money on saying exactly where they’re going. But not straight back down would be my most confident assessment.

Paul Johnson

Right and that’s, as we’ll come onto in a minute, that really matters to how we respond to it. But I’m very interested in going back to your teaser, just now and you said you want to fess up to something, well now is your chance, on IFS Zooms In, make your confession.

Giles Wilkes

I will, I will confess here because the energy bill is a very complicated thing with lots of charges that are put on existing customers, so some of these are like added amounts that energy companies can do, things like insulate your house and then charge it to the general bill payer. Or put-up wind turbines that cost more than the current market price, at least that was the case at the time, and then charge the billpayer. Now the changes that’s coming on in the next six to eight months is the cost of a lot of these companies that have gone bust in the last six to twelve months. And those companies have gone bust owing money to the system for various parts of this energy bill stack, like renewables obligation we call them. And that price, which is listed in this excellent material from Carbon Brief as “other costs,” is due to rise from just glancing at it, from about £530 to £670, which is quite a significant amount. Now these are costs that other billpayers were being let off earlier saying, I’m not sure it’s a net cost to the system; but it is going to be something that all the people who were just on the same energy supplier the whole way now have to bear. Which is why it is fair to criticise the system of regulation for allowing so much failure because when failure happens, the rest of the market is left carrying the cans. So, that is going to be a significant part of the price rise coming up, but it’s nothing like the whole of it, it’s mostly the wholesale gas price.

Paul Johnson

Yeah, so lots of gas companies entered the market, didn’t have enough money to see the way through this kind of scale of increase, they’ve left leaving debts and everyone else had to pick that up. Just finally, finally for now, some people have referred to this as the first net zero crisis, as if this is somehow very closely related to policies to increase green electricity production. Is this the first net zero crisis or is this just a, as it were a traditional spike in commodity prices kind of crisis?

Giles Wilkes

I would say it’s impossible for the discussion of net zero to escape this issue, partly because people will be looking very closely at everything that’s part of the energy price bill and some of it would have been past renewables cost. But it’s not those past renewables costs that have suddenly shot up. And you could argue that had we gone even further and faster on renewables, the fixed process we were agreeing for wind in particular would now look like an astonishing bargain. So, you can’t say, “if only we hadn’t gone so fast on net zero, we’d be sitting pretty,” because we’d be buying more gas and its gas that’s got extremely expensive.  

However, you could see people saying, this has shown us some of the risk of the instability you get through net zero. Wind is intermittent, we had that quiet summer through Europe that meant we needed more back up storage. So, it means we have to think very carefully about how we do net zero to make sure we don’t introduce more volatility into the system. Which is going to be a challenge, but ultimately a more de-carbonised electricity system ought to end up being more stable. It will be a combination of gas, for some of the storage, but mostly wind, solar, batteries, hydro and so forth. And that is actually a more stable mix long term. So, I don’t think it shows net zero is a mistake, but certainly there are challenges in redesigning the system as we move forward.

Paul Johnson

And one of those challenges I guess that worries some people in respect of the cost, is we can have lots and lots of wind and solar and so on, but because the wind doesn’t always blow, and the sun doesn’t always shine, we’re also going to, were also going to need to sort of have double the amount of infrastructure, because we’re going to need gas as well to come on when the wind isn’t blowing and the sun isn’t shining. I mean is that a big part of future costs?

Giles Wilkes

Well, I mean as part of the energy reform that set up all of this, I think it was the 2013 energy market reform, they set up something called the capacity market, which means that you pay gas producers to have idle capacity for those weird spikes that happen. And that’s all part of the policy cost, so in theory, you can set up a big, basically an insurance payment to have all this idle part sitting by and it might be gas, or it might be demand management, or it might be batteries, or it might be hydroelectric plants. So, in theory the system can cope with hits. Obviously, the more wind you get, and the more of that potential intermittence, the more you’re going to need that insurance. But in theory, we can deal with it via these insurance payments, so I don’t think it’s an insuperable obstacle to overcome.

Paul Johnson

That’s good to hear, let’s move on from there to the question of you know what government can do about it. I mean first of all Stuart, we’ve heard quite a lot about the so-called cost-of-living crisis, now part of that of course is the increase in energy prices, but what else is going on at the moment which is leading people to worry that especially people’s standard of living is likely to fall this year?

Stuart Adam

Well, I think there are a number of things going on. So first of all, energy prices aren’t the only price that’s rising, overall inflation is now expected to be much higher than was expected even a few months ago, let alone than what we’re used to over the past few years. The Bank of England currently expects annual inflation to reach 6% in April and these prices rises aren’t even telling the full story of the difficulties of getting hold of things, because ongoing disruptions to supply chains and so on means that actually it still can be quite hard and involve delays buying something’s at all.

Now at the same time you’ve got price rises and supply chain difficulties, you have wages not growing particularly quickly and you have increased taxes in those wages due to come in in April. And there are two big one there, you have effectively a National Insurance increase, what will become the Health and Social Care Levy, and then you’ve got a freezing of tax thresholds, including the tax free allowances in income tax and so on which, of course, is - freezing those is a much bigger deal when inflation is high than when inflation is lower, as it was expected to be even less than a year ago when the chancellor announced these things. So, you’ve got a combination of all of those things, you’ve got a low wage growth, you’ve got higher taxes and you’ve got rising prices.

Paul Johnson

Well, that’s a pretty nasty set of things to be coming in together. I mean one obvious thing that lots of things have suggested the government is well, you’re in control of these tax rises, why not do them? Either we get rid of them all together or delay them until this particular crisis has passed, why not do that?

Stuart Adam

Well, I think the main argument against that, one is the sheer cost of this, the government not bringing in the Health and Social Care Levy because it wants to raise taxes, it wants to do it because it needs money and particularly needs money, in this case it’s designed to deal with the NHS backlogs, in particular initially and increasing overtime to deal with provision of social care. So certainly, doing this on a permanent basis would just be very expensive about £12 billion a year the governments expecting to get for this, and that’s not something that can very easily be replaced.

Dealing it for a year, in principle a one off hit to the public finances like that wouldn’t be the end of the world, but of course, once you delay these things the question is, how likely is it you would really be able to bring them in later, particularly as you know the next general election gets closer and closer. So that’s one kind of argument against doing that, is the cost or the difficulty of delay.

The other issue is as a way of dealing with price rises in particular and energy price rises most of all, it’s just not terribly well targeted. These tax rises are basically bigger for those people that earn more, and those people that earn below National Insurance threshold or those people’s whose income comes from other sources aren’t due to get a tax rise at all. And so, as a way of helping people deal with rises in energy bills, it’s just not very well targeted at doing that.

Paul Johnson

Seem sort of fairly obvious in a sense how you might help people on the lowest incomes, people who are out of work and on benefits, you might just increase their benefits. But what can you do to - well first of, all, would that be a reasonable response? But secondly what can you do for people on modest earnings but who are outside of the benefits system without spending an absolutely arm and a leg?

Stuart Adam

Yes, I think that’s the difficulty and there’s clearly a trade-off between how many people you want to help, and how much you want to help them, and how much it’s going to cost you. Because clearly trying to protect everyone who’s effected by energy price rises, trying to protect them all completely would be phenomenally expensive, we don’t know quite how much energy bills are going to rise in April and the months that follow, but as you were discussing with Giles, you could be thinking in the order of a hundred pounds or more per household. So again, maybe ten, fifteen billion pounds, even more, per year, for the government. So, trying to cover all of that would be extremely expensive. So, you could to some extent, you know you could try and cushion the blow a bit for everyone, or you could try and cushion the blow a lot for the poorest households. And so, if you wanted to focus on the poorest households, then yes, increasing benefits rates, presumably on a temporary basis, so it wouldn’t have to be, is the obvious way of doing that, it’s what would be perfectly feasible. It would not be dissimilar to expanding the Warm Homes discount that already exists in energy bills, it would be a way of doing it through energy bills, the way that works at the moment is a bit complicated and unsatisfactory, you’d need to really transform it quite a lot in order to do this, and that was what the labour party’s proposing to do in this space. But doing it either through benefits or through something like a much expanded Warm Homes discount would be a way to target help at low income households.

If you wanted to do it more broadly, one widespread suggestion, again this is now labour party’s policy, is to get rid of VAT on domestic fuel, which is already at a reduced rate of 5% you could set that to zero, that has some quite serious downsides that we might come down to. You might try and deal with it directly through reducing energy bills through things like a price cap that Giles was talking about. Or you could do something of a kind that we haven’t done before. So, you could just, for example, send every household a cheque for you know £200 in the post. Or again, you could do that through energy bills if you wanted to, so fund all suppliers to take a hundred pounds, three hundred pounds or whatever it might be per year of everybody’s energy bills. Now we don’t currently have mechanism set up that do that, but it might be possible to set them up. And so, there’s a whole range of things that you could do here, and then it starts to come back to exactly what you’re trying to do and who you want to target these things.

Paul Johnson

And obviously from the list of things that you went through there Stuart, really quite difficult to do something, certainly using our traditional mechanisms for the bulk of the population. But I mean just thinking about that Giles, on what Stuart was saying about energy bills, we’ve heard I think various suggestions that maybe the government could ask energy companies to keep their bills down next year by lending them some money and then, and then evening out the price of bills over time, is that a genuinely plausible thing, given the way the market works?

Giles Wilkes

I was discussing this with a couple of my friends who’ve been close to government in the past about this. I think it’s so hard to design correctly without being gamed, and I say this the day after the lords minister has resigned because of the amount of fraud from the coronavirus bounce back loan scheme. Now you could think immediately of ways that this might be gamed. I mean suppose the system is, you loan off what the wholesale price is when they’re high, but then you’ve got to pay them back when they’re low. But what’s going to ensure that the companies will hang around to be paying them back? I mean how are you going to ensure you’re going to get it all back?

And in a sense you’re, the government staking a large gamble against future energy prices. Saying to the market, we’re going to take that risk for you, which a) is a bad idea for efficiency, you want the market to be thinking hard about how to get good sources of supply and so forth. And b) anything that offers a free option to anyone who’s remotely capitalist is going to be, there’s going to be the risk of some sort of abuse. So normally that means regulated really tightly, design it really tightly and you can see what happens when you don’t have the time to do that with the bounce back loan scheme, you have billions of fraud. So, I just can see it going horribly wrong if they try and rush that out, as well as the fact that it will distort the market terribly. So, I’m sure they’re thinking about it, but my goodness it’s hard to get that kind of policy right. It took months to design the price cap currently, and even that had a lot of criticism. How you design a price cap and pay back system for the whole wholesale market? Good luck.

Paul Johnson

Ah, well that’s not very encouraging. I mean is there anything that you think the chancellor could do, which is within, sort of setting aside everything in the tax and benefit arena, is there anything that he could do with regard to energy regulation or subsidising energy companies or anything in the short run? He’s got a Spring statement in the six weeks or so, he can’t stand up and say nothing I think, in the face of all this, is there anything that he could do in terms of regulation, price caps, loans to companies, anything like that?

Giles Adam

I can only offer general principles as opposed to as a total answer. Because as you said at the beginning, I mean we as a country are importing a certain huge amount of gas, I think it’s going to come to tens of billions of pounds and that bill has gone up and it’s a question of how you share it around the place. Now, some of the principles I would offer is, fuel poverty is an extremely irritating for people on middle and higher incomes. You know you suddenly don’t have some money you wanted to have, and you’ll be angry at the government no doubt, but it’s not fatal. For people who are really struggling to pay their bills, the real risk is they don’t use the energy they need to use and they really suffer or they don’t heat their homes. And so, it has to be progressive even if it’s not politically popular. So, I do think that the sort of ideas that Stuart was discussing there have got to be the sort of place to go.

Politically it has to be visible, in that if the bill goes up by £600 and it would have gone up by £800, nobody’s saying thank you, which is why they’re very attracted to things, cheques with Rishi’s name all over it and copious use of Instagram. That’s bound to be discussed, so they’re going to want to do things like, I mean I’ve seen a good suggestion from a colleague of mine called Josh Buckland, who used to work on energy policy, you know, what about some of that National Insurance rise that they’re arguing about so much, why don’t you say some of that should go towards this, because we know you’re hurting. But really there isn’t, there can’t be an easy way around it. And the worst mistake the treasury hates the most, which I’m sure you remember from, you spent time in the treasury, helping the capitalists who made the mistakes as opposed to the end consumers, is the worst mistake they think you can make. If you just make shareholders happy, you haven’t dealt with the problem at all. So, they’re going to want to think ultimately, how do you get the end user to benefit from our largess.

Paul Johnson

Well, that’s an extremely good principle. Stuart you’re, you know, the day after the Spring statement we’re going to be analysing it and telling the world what’s good and bad about it. What response to this, assuming there is a response would you be applying on the day after, if Mr Sunak announced something on the day of the Spring statement?

Stuart Adam

I think it’s, it’s a difficult thing to get right and to say, “yes, perfect we’ve found the solution to.” I think I would start off by saying, “yes, let’s make sure that low-income household are protected as far as possible, at least to some degree.” And one thing that we could look at there, is in a way, benefit rates are supposed to be protected against inflation. Because benefit rates go up each year in line with inflation. Now the trouble is, at the moment they go up with a lagged measure of inflation. So, they’re due to go up in April, in line with what inflation was in the year up to last September, which is about 3% - 3.1% in fact - but by April, in the year to April, we expect it to be 6%. And so, actually benefits aren’t going up quickly enough, I mean it would capture a year later, but in the short term, benefits aren’t keeping up with the rate at which prices are rising.

And so, one thing the chancellor could do is just as a short-term measure announce a temporary increase to benefits. Maybe that extra 3% to make up the difference to the amount they’re going up, that overall prices are going up. Actually, what I think would be rather better, is if you changed the way that benefits were uprated permanently, so that they always go up by a more recent measure of inflation. So that they would go up by 6% this April rather than going up by 3.1%. But then each year they went up in line with a more up to date measure of inflation, either just you know the latest we’ve got by April, or what inflation is forecast to be over the coming year. So, I think that would be my starting point for what I would like to see some help for households. Because it’s a reform that makes the system more rational anyway.

Paul Johnson

And I think from what you said previously, if the political pressure which I think it is, is not just to help those in the lowest income but to help people in middle incomes, that as much harder thing to think about. And you know you might almost be in the world of selecting households to send cheques to because we just don’t really have the capacity to focus reduced tax of reduced benefits on for example, someone earning thirty thousand a year or who happens to be living in a particularly expensive house to heat.

Stuart Adam

Yes, I think that’s right, but actually, again administration permitting I think there are worst things you can do than just send a cheque to every household or to you know, households in certain categories that you can identify relatively straight forward.  

The other main option in this space is that reduction in VAT from 5% to zero, I do worry about that. I particularly worry about whether you can really do that on a temporary basis. But I think it’s important here to highlight a trade off, but I’m not sure that has been noticed enough with this so far, which is as well as thinking about do you want to help everyone or focus it on the poorest, do you want to target support on those who have higher energy bills, perhaps because they live in you know draftier houses, or whatever it may be. Because things like a cheque for every household, or even an increase in benefit rates, don’t provide more support to those who’s bills go up more.

And if you think of say poorer households, so for households in the lowest income 10% of the population, on average gas bills are about 4 or 5% of their budgets, but for about a tenth of that poorest end of households, gas bills are over 12% of their budget, not 4 or 5%, and so some low income households are going to face much bigger raises in energy prices, well energy bills than others. And something like a uniform increase in benefit rates isn’t really going to get at that. The only way really that you can provide more help to those who’s bills go up more is by reducing the price of energy, whether you do that directly through the price gap or some other measure in the energy market, or by reducing the VAT rate. But the trade-off there is that if you’re reducing the price of energy, you’re going to be encouraging people to use more of that stuff. And given that we’re trying to get to net zero and all the rest of it, a particularly over the long term, encouraging people to use more energy doesn’t sound like something that we want to be doing. And so, it’s very difficult both to provide more support to those who’s bills are going up most, as opposed to the poorest households who can least cope with bill increases, and also to avoid providing a bigger subsidy for burning gas at home than we already do.

Giles Wilkes

I was just going to say, and this is not to be sycophantic to the IFS, I still remember an excellent report you guys did in 2013 where you analysed all the different carbon prices and carbon taxes in the economy and how you showed that thanks to the lower VAT on household bills, it’s got a negative carbon price, in other words in actually encouraging people to do the opposite. So, cutting it to zero as Stuart said would make a bad problem worse from the point of view of climate.

Stuart Adam

Yes, and just to add to that, we actually updated that work last year and found that it is still the case that actually domestic use of gas is subsidised at the moment relative to other consumption. And in the long run, it’s not a popular time to say it, but in the long run I would like to see the VAT rate on domestic energy go up rather than go down. But the long run solutions there also need to be about helping households to more way from burning fossil fuels by improving energy efficiency, moving over to electric heat pumps and things like that.

And there’s a discussion to be had as to whether the policies the government has in place to do that kind of thing, are enough. Frankly at the moment I think that they’re not, they’re doing some things but they’re a bit patchy and not entirely effective. So, I think there is a longer-term question where I would like to see the taxes on household use of energy actually be higher but with more help for households to reduce their energy consumption. But nothing, I mean we’re not going to get big moves towards insulation and towards heat pumps by April. And so, like it or not there is a big crisis for households’ budgets coming down the road in a matter of weeks, and the government really needs to do something about it in the short term.

Paul Johnson

Well, that’s probably a good place to end, crisis coming down the road in a matter of weeks and the government needs to do something about it. But as we discussed it’s not easy to determine exactly what it should do, beyond I think what we would all agree, compensating those on the lowest incomes for what inflation actually is, rather than what it was six months or so ago. I think as Giles has told us, what’s happening in the sort run really is what’s happening on international energy markets, our bills are a bit higher than they would have been had we not been going towards net zero, but that’s not really at all what’s driving this big increase at this, at this moment in time.

Lots of things to sort out on energy policy, both in the short run and the long run and there’s certainly, we need to keep those two separate, what might be right for the short run, might not be right for the long run, but we can’t forget what we need to do over the longer term. We’ll wait and see what Mr Sunak or his boss or Kwasi Kwarteng perhaps comes up with over the next month or two. I think it’s unlikely they will come up with nothing, given the scale of the public concern about this, but the chances to come up with something badly designed are pretty high. So, we will certainly be keeping an eye on that, I’m sure Giles will be keeping an eye on that and be continuing to comment as well.

But for now, thank you very much indeed for listening to us on the IFS Zooms In, do keep well and we will be with you again in a couple of weeks.