The unforeseen and unintended consequences of government intervention

This month’s crisis in the wholesale energy markets may well have been foreseen and expected, but clearly not by decision makers and legislators who either ignored what the industry was predicting; or maybe not. Just one of these once in a lifetime events. Un-forecastable just like COVID, perhaps.

However, surely our leading economists (and they are all leading these days), energy industry  boffins and others must have warned successive governments that their policies on driving energy prices down through competition and urging consumers to shop around for the best price was bound to end in tears, bankruptcy and stranded customers.

Then of course there is the decommissioning of gasholders and other storage capacity, reliance on imported energy, lack of wind and so on.  The government’s price cap (which is a tax) rises by 12% to £1,277 per annum in October and stays against the will of the providers. They are losing up to £500 for every customer who hasn’t fixed and is on standard variable rate, over the last 12 months, according to Go Compare. What about the comparison websites, generally?

Moneysupermarket.com’s share price is at its lowest for seven years as the “market has fallen out of love” with the company, says broker Peel Hunt. So what have we learnt? The headlong  pursuit for the cheapest deal may well result in less competition and the old cartel back. Or as the PM said from Washington at the weekend, “the market will sort this out.” Really?

You might say the same with the shortage of lorry drivers. Tesco boss John Allan tells us that it will all be sorted out soon and Christmas will be fine, although he did blame Brexit (and COVID, surely). According to Private Eye reader Shaun Cossar, with 27 years’ HGV experience, “Tesco has been at the forefront of making a career as a truck driver almost overwhelmingly unappealing”.

When he started truck drivers, like train drivers, “were well paid and valued, whose jobs were coveted.” Since the 1990s large logistics companies have moved in, saving retailers money and drivers’ pay has stagnated. Council rubbish collections have been hit as bin men quit to become supermarket and retail delivery drivers lured by short term bonuses, but that is no substitute for career-long enhancements to pay and conditions.

Do people working from home not realise that insurance policies may not cover commercial work undertaken from home offices? And that VAT on telephone and other utility bills is charged at the commercial rate of 20%, four times that for domestic usage.

Another extraordinary and unintended consequence is the soaring cost of second hand cars which have for ever, with perhaps the exception of classic and vintage cars, been depreciating assets. With no VAT and  no capital gains tax to pay, some second hand cars have gone up almost £10,000 in five months, The Times reports.  What does the insurance industry make of the current pricing “rules” for second hand cars? Historically, once driven off the forecourt , a new vehicle would have lost 20% in value straight away – the VAT, plus ten or so per cent for mileage and wear and tear per annum.

Now, due to the lack of supply of new cars due to a global shortage of microchips and shipping containers, prices of second hand cars have risen 20%  since the spring and in some cases, they are advertised for sale at significant premiums to brand new models. Who’d have thought it! 

Allan Noel-Baker is a director at City Road Communications

You might say the same with the shortage of lorry drivers. Tesco boss John Allan tells us that it will all be sorted out soon and Christmas will be fine, although he did blame Brexit (and COVID, surely). According to Private Eye reader Shaun Cossar, with 27 years’ HGV experience, “Tesco has been at the forefront of making a career as a truck driver almost overwhelmingly unappealing”.

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