The price ceiling for energy set by the cabinet cannot prevent the purchasing power of an average household from falling this year and next. This is evident from an estimate by the Central Planning Bureau.
Purchasing power is expected to fall by a total of about 4 percent this year and next year, as a result of high inflation and lagging wage growth. The CPB has calculated the effect of government policy in scenarios.
This shows that the price ceiling does dampen the purchasing power effects of higher energy prices for households.
At the same time, the CPB warns against the debts incurred by the government by taking the measures. The government deficit threatens to grow to 3 percent of GDP in 2023. CPB director Pieter Hasekamp says that the cabinet must therefore think about the longer term. “The government has bought time with the support measures, but now has to think quickly about an exit strategy from 2023. We will have to take structurally higher energy prices into account. A structural problem requires structural solutions, the current price cap does not.”
According to calculations by the CPB, approximately 430,000 households run the risk of no longer being able to pay fixed and necessary costs (such as food, housing costs and energy costs). In the ‘severe winter scenario’ this could rise to 500,000 households.
The CPB, an important adviser to the cabinet, says it expects ‘energy prices to remain high after 2023’. If the government were to continue to compensate citizens for this, it would mean a ‘deterioration of public finances’, of which ‘the bill will be passed on to the future’.
The CPB writes that ‘generic purchasing power measures’, such as the energy price ceiling, are ‘untargeted’. Namely: not all households need the compensation financially. According to the CPB, it also removes ‘the incentive to make the necessary energy savings and sustainability’. “The current policy can also push up energy prices and inflation further, and the ceiling disrupts the functioning of the energy market.”
According to the CPB, purchasing power recovery must ‘ultimately come primarily’ from an ‘adjustment of wages’. “Government policy can best be focused on sustainability and energy conservation and targeted compensation of the most vulnerable households.”
Price cap
To reduce citizens’ energy bills, the cabinet will set a price ceiling from 1 January for the whole of 2023. Anyone who consumes more gas and electricity than the set ceiling pays the higher market rate. Below that, a rate applies at which the government assists. An energy bill with average use will be a maximum of 241 euros.
In order to do something about the high energy bill already this autumn, energy companies will reduce the energy bill from 1 November. In November and December this year, households will receive a fixed discount on their energy bill of 190 euros per month. That compensation is the same for everyone.
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