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MILLIONS OF SMART METERS MAY HAVE TO BE REPLACED

Six million smart electricity and gas meters installed in homes since 2012 may have to be replaced to make them work with a new communica...

Sunday, 30 April 2017

MILLIONS OF SMART METERS MAY HAVE TO BE REPLACED


Six million smart electricity and gas meters installed in homes since 2012 may have to be replaced to make them work with a new communications network which was switched on in November but is still not being used. Despite that energy companies are busy installing more of them to try to meet a government target to get one in every home by the end of 2020.

All the meters installed so far are an early design called SMETS1. They use existing mobile phone networks and the communications system is specific to each supplier. That means if you switch your fuel provider to get a cheaper deal – it is Government policy that you should – then the smart meter will almost certainly go dumb. Then it has to be read manually either by the householder or a meter reader. Some people have complained that reading a dumbed down smart meter is much more difficult than reading a traditional meter designed to be read by a human. Instead of a visible dial with numbers turning round buttons have to be pressed in the right - and forgettable - order. 

The upgraded smart meters – called SMETS2 – have been delayed partly because a new £3 billion communications network was not ready for nearly a year after the planned date. It went live in November 2016. But five months on energy suppliers are still testing it with the new smart meters. They had to be extensively redesigned after security concerns and discussions with GCHQ. If all goes well fitting the new meters will start later in 2017. Those meters using that network should be able to work with all suppliers and allow switching supplier to be easier and quicker. 

But the Data Communications Company, part of Capita which is responsible for the new network, could not tell me when or indeed if the old SMETS1 meters would be connected to it. A spokesman told me that the consultation on how that might be done had not even begun. He said it would “go live in the next few weeks”. The consultation that is. He could not confirm a date for the start or the end of that consultation still less for when SMETS1 meters would be connectable or indeed if that would ever happen. He agreed it was possible that SMETS1 meters would have to be replaced with SMETS2 meters.

He repeated that to a Money Box colleague the next day. But when asked if he would confirm it in writing all DCC would say was “DCC will be consulting with industry on plans outlining how SMETS1 meters will be enrolled into the network.” And he stressed the word 'how'. The Department for Business, Energy, and Industrial Strategy (BEIS) would not deny that there may be problems but told us "The project is on working out how they will be enrolled into the new network not whether they can be enrolled. Our expectation is that all SMETS1 meters will be enrolled into DCC."

Others are not so convinced. Technology consultant Nick Hann, who was involved in early designs of smart meters, told me on Money Box on 29 April.

"It is something that the industry has been very aware for three or four years. The new SMETS2 meters are far more complex and there's always been a question of whether it's possible to upgrade the existing ones. But it is one of those things that everyone has been desperately hoping we can magically wave a wand and all the old ones will start working. It now looks as if reality's starting to bite and people are beginning to think that may not be possible."

The ambitious programme to replace more than 50 million gas and electricity meters in every home is expected to cost at least £11 billion. By the end of 2016 around five million had been installed, nearly a million of those in the final quarter of 2016. Today the number is probably over six million. The remaining 44 million should be replaced by 2020 which will mean trebling the current rate of installation. 

If all the SMETS1 meters have to be replaced or modified that will add to the cost and increase the timescale. Nick Hann said it might add 50% to the costs and call the viability of the whole project into question.

Meanwhile the energy companies are busy encouraging people to accept smart meters – all of the old type – without any clear idea when or if those meters will make use of the new DCC network. Energy companies are not informing customers of these potential problems. And nor is Smart Energy GB which will spend nearly £50million in 2017 telling us all that smart is the way to control dumb old 'gas and leccy'.

Read my updated blog on the smart meter project with links to the Cost/Benefit Analysis 
Listen to Nick Hann's interview on Money Box.

1 May 2017
Vs 1.01

Thursday, 6 April 2017

MOTHERS MUST PROVE THEY WERE RAPED TO GET BENEFITS

From 6 April 2017 the Government will make mothers prove they were raped or sexually abused to get benefits for a third child. 

Rape will be the main exception from the UK's two child policy which now applies to low income families who claim tax credits, universal credit, or housing benefit. It will also apply in some areas for council tax support or reduction. In general there will be no extra money for a third or subsequent child born from 6 April 2017. That will apply to new claims and existing claimants. 

The standard maximum amount for each child in tax credits or universal credit in 2017/18 is £2780 a year. So parents with a child who is subject to the new rule will get nothing rather than £2780. There will be some exceptions. 

Rape
The most controversial exception to the two child rule is for a child born as a result of rape. The mother will be able to claim benefit for the third or subsequent child born from 6 April 2017 if she applies for the exception on grounds of rape and proves that the child was the result of rape or sexual abuse. 

To do that she will have to talk to a social worker, doctor, or nurse and describe what happened and when.

A policy document issued – slipped out some say – on the day of President Trump’s inauguration explained the procedure. A mother claiming this exception would have to “engage with a professional third party” who would provide “Evidence…demonstrating that the claimant’s circumstances are consistent with those of a person who has had intercourse without consenting to it (at a time when the conception of her third or subsequent child might have resulted).” 

The Department for Work and Pensions would then decide whether to grant the exception or not. 

The exception would also apply if there had been a conviction or a criminal injuries compensation payment for the rape.

The Government ignored what it admitted were many responses to the consultation which said "it was unacceptable for Government to ask women to re-live the ordeal of a rape just in order to make a claim for benefit.” It also dismissed “concerns around the mental health impact on victims and pre-conceived perceptions of what a victim should look like.”


The Government also decided that it would include in the rape exception children born as a result of "coercion and control" in a domestic setting. But only if the victim stopped living with the alleged father. “Rather than financial support through benefits for those who do remain with the perpetrator, we think other forms of victim support are more appropriate.”


Twins and multiple births
If someone has one child and then has twins they will get money for both the twins, even though one of them is a third child. But if they have two children already then twins born from 6 April 2017 will have to survive on the money given for their two older siblings. In other words, each child will have half the money it would get if the new additions had been born before 6 April. 

Care
Children adopted from local authority care are exempt from the two child policy as are children living long term with family or friends who would otherwise be in local authority care.

Universal Credit
Universal credit is only available to parents with children in a very few areas - called full service areas. Until November 2018 anyone with a third or subsequent child born from 6 April 2017 who claims universal credit will be directed to claim tax credits instead. Those already on universal credit who have a third or subsequent child from April 2017 will get no extra for it.

Child benefit
These intrusive questions and complex rules will not apply to better off parents who claim child benefit where the means test starts much higher – at £50,000. Those parents will continue to get money for every child including those born from 6 April 2017.

Family premium
Another separate cut in the money given to families also begins on 6 April 2017. Parents making a new claim from this date will not get the extra payment of £545 a year previously paid for the first child. Nor will it be paid for a first child born after 6 April 2017. Family premiums were abolished for housing benefit from 1 May 2016 and for council tax support and reduction schemes from April 2016 in some areas.

Austerity bites. Particularly on families with children.

Vs 1.00
6 April 2017

Saturday, 1 April 2017

UNIVERSAL CREDIT - 80% TAX RATE IN 2017

Some householders who get the new means-tested benefit Universal Credit will keep just 20p of every pound extra they earn – an effective tax rate of 80%. In some parts of England it could be more - losing up to 82.4p in every pound that is earned, leaving them with barely 17p for every extra pound they earn. Those losses could undermine the work incentives which the new system is designed to create. 

For graduates on incomes above £17,775 but low enough to get Universal Credit, the deductions would be more, adding about 2.5 percentage points to those figures. Worst case would be earn £1 keep 15.3p.

Universal credit
Universal Credit began to be rolled out from October 2013 to replace six means-tested benefits and tax credits. By 2020 it should apply to most new claims for help with income or rent. It is paid to people on low incomes who cannot work, are looking for work, or work on very low pay.

It is supposed to let people keep more of what they earn and thus boost incentives both to return to work and to earn more once in work. For every £1 extra earned the credit is reduced by 63p from April 2017 allowing the claimant to keep 37p. Before that it was 65p. This so called ‘withdrawal rate’ of 63p in the pound is said to be much lower than rates under the previous and allowing people to keep 37p of what they earn is seen as an incentive to work. However, that figure of 63p withdrawal rate is only accurate for people who earn less than £157 a week and are not householders.

Taxpayers
Universal Credit is worked out after tax and National Insurance have been deducted. In 2017/18 anyone earning more than £157 a week will pay National Insurance and once they earn more than £221 a week income tax begins. Someone paying National Insurance will lose 12p in the pound before their Universal Credit is worked out. The total loss from NI and reduction in Universal Credit is just over 67p from each £1 they earn. So they keep less than 33p. If they pay income tax as well they lose just over 75p of each pound and keep just over 25p. The calculation were originally confirmed by Pensions Minister Steve Webb in Parliament in 2012 when the details were different. (Hansard, House of Commons, 11 September 2012, col.196).

But that is only part of the picture.

Householders
Universal Credit, despite its name, does not replace all means-tested benefits. It does not include the means-tested reduction in council tax which used to be called Council Tax Benefit but since 1 April 2013 has been replaced by a very similar scheme called Council Tax Support which is operated by local councils. Like all means-tested benefits Council Tax Support is withdrawn as income rises. The standard taper is 20p for each £1 rise in net income (after tax, NI, and Universal Credit withdrawal). In other words for each extra pound of net income help with council tax is reduced by 20p. The result is that for each £1 earned a total of 80p disappears in tax, NI, reduced Universal Credit, and reduced Council Tax Support. The calculation is at the foot of this blogpost.

Localism
In some areas of England and Wales the reduction for every £1 of income earned may be even higher. As part of the transfer to local councils the Government has cut the money it currently pays towards help with council tax. From 1 April 2013 councils get 90% of the money they got to pay Council Tax Benefit. The Government has already said that out of that reduced budget they will have to pay exactly the same benefit to anyone over pension age. Nearly half of all Council Tax Benefit recipients are pensioners so the other half – working age people who can claim Universal Credit – will bear the whole of the funding cut. That will mean a reduction for them of between 19% and 33% according to the Institute for Fiscal Studies (www.ifs.org.uk/comms/comm123.pdf chapter 5). 

Councils have now published the details of their schemes for the fifth year of local council tax support. In 2017/18 the great majority are keeping the taper at 20%. But 18 have a higher taper. Seven have raised it to 30%; another 12 to 25%, and one to 23% . Only three have cut it to 15%. The analysis is done by the New Policy Institute.

In areas which raise the Council Tax Support taper to 25% householders on Universal Credit who pay tax will find that 81p of each pound earned disappears in deductions. In areas with a 30% taper they will lose 82p and keep less than 18p for each extra pound earned in income tax, National Insurance, reduced Universal Credit and reduced Council Tax Support. In the three areas where the taper is 15% people will lose 79p of each extra pound. 

Students
Students on plan 1 or plan 2 who pay in effect an extra 9% tax whose income is low enough to be entitled to Universal Credit lose typically 82.5p in the extra pound keeping just 17.5p. In areas where the council tax withdrawal rate is 30% they keep just 15p in every extra £1 they earn.

It is a tax
Some people object to the total deductions made from a means-tested benefit being called a 'tax'. They say that the reduction in a subsidy from taxpayers is not a tax. Tax, they say, mean a levy on your own money not a reduction in the money the state gives you. 

But it is a tax. And officially so. In his Spring Budget, 8 March 2017, Phillip Hammond confirmed that the tapered loss of this benefit was a tax. He confirmed the reduction in the taper rate by saying "the Universal Credit taper rate will be reduced in April from 65% to 63%, cutting tax for 3 million families on low incomes."

Conclusion
Losing 80% or more of each extra pound you earn is hardly an incentive to work or to work harder. It is almost twice the 42% tax and NI deductions for higher rate taxpayers with incomes over £45,000, three times the minimum wage.
CALCULATION OF TOTAL DEDUCTIONS FOR A TAXPAYER HOUSEHOLDER
FOR EACH £1 OF EXTRA INCOME WITH 20% COUNCIL TAX TAPER SHOWING EFFECT OF 63% UC TAPER FROM APRIL 2017

EARNS EXTRA
£1.00
Tax
20%
-£0.20
NI
12%
-£0.12
Net after tax
£0.68
UC reduction
63%
-£0.43
Net after UC
£0.25
CTS reduction
20%
-£0.05
NET GAIN
£0.20
Effective tax
80%

This blogpost replaces the one originally published 19 September 2012.

1 April 2017
Version 1.01