The decision to allocate 2.7 billion euros to the higher energy bill of consumers by compensating for the sharply rising gas price is a rash, experts believe. They foresee that high incomes in particular will benefit from this scheme.
The money will be used to reduce energy taxes, among other things, and a small part, 150 million, is intended for insulating homes. The budget institute Nibud is pleased with the move by the cabinet. “We think it’s great that there is such a quick response,” said a spokesperson. “But we still have to see whether it is also enough for the people who will have to pay 900 euros more.” The cabinet expects that the scheme will save households an average of 400 euros.
Peter Mulder, Energy Studies researcher at TNO, also understands very well that the cabinet is coming up with the compensation. “This is perhaps the best thing the cabinet can do in this situation. People with payment problems have been helped in the short term.”
Money with the wrong households
But according to Marieke Blom, chief economist at ING, that is precisely where this measure fails. The compensation applies to everyone, regardless of income.
“The fact that a generic measure is now opted for will mean that high-income households will also mainly benefit from this, while they have improved in terms of savings during the corona crisis.”
The government has thought about compensation schemes that would mainly be used by households with lower incomes. “Precisely because we have opted for a broad measure, some will also end up with people who do not need it,” says outgoing minister Yesilgöz. “But it had to be done properly and quickly, a more complicated measure takes too much time.”
According to Blom, there were possibilities. “95 percent of the money goes where it shouldn’t. For example, if you had done something for lower incomes, it would have been better. It concerns such a small group compared to the entire amount. Even with very high implementation costs, it ended up better than if you did it generically.”
Sustainability incentive removed
Economist Pieter Gautier, affiliated with the Free University of Amsterdam, calls the measure “inconvenient and a waste of money”, if the money does not reach the households that need it most. He also sees a side effect. “With this compensation measure, the incentive to save energy is removed by insulating or living smaller. If the energy price remains high or rises even further, the government will continue to compensate.”
Mulder of TNO also believes that the entire amount could have been better invested in insulating houses. “With that amount, you could have insulated a lot of houses, and thus removed a significant part of energy poverty.”
‘Keep a cool head’
The government remains in the reflex of compensating and absorbing costs, as during the corona crisis, observes Blom. “As an economist, I say that you should only do this type of policy if it otherwise has a very large domino effect. And that is not the case in this case.”
That is why she is advocating that the cabinet reconsider the compensation. “First see if those gas prices remain so high, for April and March the expected price is already much lower. And take the time until at least the end of the year to arrive at a more targeted approach. After January 1, 44 percent of the households only notice what it means for them when they have to conclude a new energy contract,” says Blom.
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