Welcome back to Gary's Economics, today we're  going to talk about Liz Truss's energy plan

okay so we're filming this on thursday  morning the plan has just come out  

the plan is to cap energy bills such that the  average household would pay £2,500 a year  

and that is going to cost the government  it looks like about £150,000,000,000 and  

that's going to be funded from the looks  of it by government spending all right so

i've got some big concerns  about this plan and i think it's  

it's really interesting i think we can learn a lot  by talking about it so the first thing to say is  

obviously the situation is basically a disaster  and it's absolutely essential that some support  

is provided so it's good that support is there  uh the problem is the way that the support is  

designed okay so i think the most interesting  thing to comment on here is we are making  

basically exactly the same mistake that we  made during Covid with regards to the economy  

again so in Covid the government gave out a huge  amount of money and that money basically all  

ended up with richer people which meant that by  the end of Covid your average rich person had  

accumulated more than a £100,000 cash and i was saying from the beginning of Covid  

but if you do this if you allow a huge amount  of money to go from the government to the rich  

then afterwards you will get a massive increase  in inequality a massive increase in inflation and  

essentially a costly living crisis which we  had um and then we had the cost of living  

crisis right so if you haven't yet watched it  i would encourage you to go back and re-watch  

the first video on this channel which talks  about how Covid is making the rich richer that  

goes through really clearly the simple question of  if the government is giving a huge amount of money  

who's going to get it explaining how it's the  rich and then talking about what does it mean  

if the rich accumulate a huge amount of cash  because this energy crisis is basically being  

dealt with in exactly the same way which is the  government is giving a huge amount of money out  

and obviously people are happy because that's  supporting their energy bills but the money  

ends up with richer people so the end result will  be a massive increase in inequality so in Covid 

they gave out by the end £600,000,000,000  which was about £13,000 for every adult 

in the country that all went to the rich and here they're giving out another £150,000,000,000  

pounds which is another about £4,000 for  every adult in the country and that again in  

this case is going basically directly to Energy  Companies and it's really important to realise  

when money goes out and it goes to Energy  Companies the money doesn't disappear that  

will be held by the Energy Companies it will be  paid out as dividends to shareholders of Energy  

Companies which are richer people and what we'll  see here is another massive accumulation of cash  

to richer people um now i've been saying from the  beginning of Covid if you allow rich people to  

accumulate cash that will push prices up and now  we've seen a situation where that has happened  

prices have gone up and we're responding by giving  the rich another massive chunk of cash and i think  

there's a real danger here that we start to get  into a cycle of we have a crisis we give the rich  

a ton of money and it truly was a huge amount  of money that we gave them during Covid that  

understandably pushes up prices and pushes  down living conditions for ordinary families  

and then we respond by giving the rich another ton  of money which will probably push prices up again  

which will mean we'll have to respond  again by giving the rich a ton of money  

it's a really dangerous cycle and you know  if anyone is a student of economic history  

they will be aware that this has  happened before in the downfall of  

most big historical empires they've reached a  point at the end where rather than funding the  

things they need through taxation especially  of the richer people who can afford it  

they start to basically print money and borrow  from the rich and try to fund things that way  

and it can get into a bad spiral of you borrow  from the rich you give the money back to the rich  

they get richer you can't afford the things you  need so you borrow from the rich again and i think  

this could be really a dangerous space um and i'm  worried to be honest if we keep trying to run the  

economy this way where we pretend we can have  the things we need without ever taxing the rich  

who increasingly own everything then the rich  will get richer and richer and richer and the  

rest of us will get we get poorer and poorer  and poorer and you will see this progressive  

falling in living conditions so you know i would  really encourage you to think about what it means  

when an economic policy results  in a massive massive cash windfall  

for the rich um what that means for you  what that means for our society because  

increasingly it seems like we're going to run  our economy this way um yeah think about that um  

but most of all you understand that £150 billion  it's not going to disappear it's going to go to  

the energy companies and then it's going to go  to wealthy individuals and they will use that money  

to push up prices to buy the houses that your  kids need you know they'll give it to their kids  

they'll buy houses ultimately it's going to cause  inequality to increase even more and that's going  

to have really damaging effects in the economy  okay so that's the first point which is that  

this is going to lead to a massive increase in  equality um and a massive accumulation of cash  

by the rich just like Covid did the second point  is and i think this is a really interesting one  

doesn't actually really solve the energy  crisis the reason for that is this okay  

there is less energy in Europe now  than there was two-three years ago  

because Russia is reducing the amount of energy  it's exporting to Europe if there's less energy  

that means somebody has to use less energy this is  like a physical fact there's less energy somebody  

has to use less so that raises the question of  who is going to reduce their energy consumption so

normally when there's less energy what will happen  in the capitalist free market economy is the price  

goes up and then what you'll see is poorer and  ordinary people will have to reduce their energy  

consumption and that's not a good way to deal  with things because in many cases that means  

not turning your heat on in the winter so in the  absence of any intervention what you would see  

is a massive decrease of energy usage by ordinary  families by poorer people which would be terrible  

you know cold homes people get sick people will  die that's what would happen so definitely you  

need some intervention but somebody has to reduce  their energy consumption right so what a sensible  

government would be doing would be looking at  the country and saying well where can we healthily  

reduce our energy consumption in what areas are  we using more energy than we need how do we reduce  

these kinds of non-necessary energy consumption so  that ordinary families can keep the heating on now  

i want you to ask yourself a question under this  plan where the government is capping bills for  

everyone including the very rich who is going   to reduce their energy consumption, who?  

if the prices are not going up beyond a certain point  who's going to reduce the energy consumption?  

well we know that prices are still increasing  significantly versus last year we know also that  

the average rich individual has accumulated  £100,000-200,000 cash over the last 2 years

their bills are being capped are the rich going to reduce their energy consumption here?

why would they? they're richer than they've  ever been they're having their bills capped  

they are not going to reduce their energy  consumption right so if you have a situation  

where we have less energy and we know the rich  are not going to reduce their energy consumption  

then still it will have to be poorer and ordinary  families that have to reduce their energy  

consumption so i honestly don't think this plan  is going to successfully save ordinary families  

from being in cold homes this winter because the  energy is not there the rich are not going to  

reduce their consumption which means ordinary  families will still have to reduce their  

consumption i think what this shows us is that our  government is taking a phenomenally naive approach  

to an energy crisis which is we have less  energy but the government rather than trying  

to manage a reduction in usage of energy is  just giving out money, but money is not energy!  

if there's less energy you need to manage it  so that the people have the most excessive  

energy consumption reduce their energy usage  that is the only way to save ordinary families  

and we're doing nothing to do that nothing to do  that which means rich people will not reduce the  

energy consumption which means ultimately families  will still go cold you know if there's not enough  

energy you need to manage it so that the rich  reduce the energy consumption that is not going  

to happen and i think what this highlights  more than anything is that our government  

and in many cases our economists are continuing to  be naive about the importance of distribution and  

never could it be more obvious than here look  there's a limited amount of energy available  

if we do not save that energy for the people  and families that need it then they will not  

get enough and you need to have a policy which  actively focuses on reducing energy consumption  

of the rich and supports the poor and it's not  there so my main concern is that unfortunately  

it's not going to work um the rich will not reduce  their energy consumption because they're having  

their bills paid by the government and by the  taxpayer which means there won't be enough energy  

um the price of energy will go through the roof  because the rich are not reducing their usage and  

there's not enough to go around which means the  government will be paying an enormous amount of  

money directly to the energy companies who are  themselves owned by the rich which means the rich  

will make an enormous profit um and ordinary  families will see their homes go cold so um  

i know that's not a positive message but it's  important to realise it doesn't have to be this  

way right the total costing of this package is  £150,000,000,000 that's estimated this moment  

if you look at The Times top 250 rich list  you'll see that in the first 12 months of Covid

those 250 individuals increased the wealth  by £106,000,000,000 so this could be paid for  

almost entirely just by taxing 1 year of excess  profits of just 250 individuals in the country  

um if you broaden it and look at the amount of  money that the rich as a whole have made in the  

last three years that is £600,000,000,000 we  know that because the government's giving it out  

so somebody must have it and it is the rich who  have it if we were to take that money back we  

could give every single adult in the country  £13,000 each without borrowing anything  

and this crisis would be over so i think  realistically there are alternatives but  

only if we start accepting that what we have  here is fundamentally a distributional crisis  

and that we need to be managing the wasteful  energy usage of the rich and the very rich  

and that that is the only way to save poor and  ordinary families um so i'm sorry that's not a  

positive message but um people need to know what's  going to happen um and yeah good luck thank you