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UK ministers rule out additional gas storage subsidies

The government has ruled out further subsidies to help with gas storage, saying that it is confident that the current level of supply is sufficient

Ministers insist that the level of supply currently available in the UK is broadly sufficient, adding that the decision not to subsidise the building of more gas storage facilities would save £750 million over the next ten years.

This announcement comes on the back of independent analysis demonstrating that the current level of demand requires no extra storage.

The study, commissioned by ministers, showed that the UK energy market continues to perform well and is attracting sufficient supplies of gas from a range of sources to cope with current and future demand.

Contrasting opinions on storage capacity needs

However, this research flies in the face of recent calls for the UK to keep more gas in reserve.

Rob Hastings, director of energy and infrastructure at the Crown Estate, insisted earlier this year that the UK was hours from running out in March.

The UK stores far less gas than other European countries do at the current time. Only 4-5% of demand is held in reserve in the UK, compared to the 17-18% averaged across the continent.

Government insists subsidies would be counter-productive

The government said that the costs of intervening with the gas market and providing subsidies for storage would far outweigh the £750 million it believes will be saved by not doing so.

Michael Fallon, energy minister, told the Financial Times: “We were right to examine the case for subsidy.

“But we are now moving energy policy back to the market. We have a number of sources of gas, as well as new fast cycle facilities being developed which will increase our gas storage capacity.”

He added the government is currently doing all it can to help those troubled by expensive bills meet their costs and get out of fuel poverty, and insisted there would be no benefit to consumers in providing expensive subsidies when the market “is not working”.

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  • PeterB

    I think you are all missing the point. Santander isn’t the problem – Central Banks are. What the Banks lend is no longer about what they take in from us, because as a nation, we stopped saving years ago – its what they borrow (very cheaply) from the Central Bank. The ever lower bank rate was suppose to have encouraged Banlks to lend so that we would spend. This hasn’t happened though – the Banks have used the QE money to shore up their own finances rather than lend it out, so because its worked so well up til now (not) , the Central Banks are lowering rates more and printing more money (QE). Einsteins definition of insanity was to keep doing the same thing over and over and expecting a different outcome, but apparnelty Central Bankers live in a different Universe.

    It is the specific intention of the Central Banks everywhere to drive rates down to ‘stimulate the economy’. The belief is that if we cannot get a decent ‘safe’ return on our money, we will decide to spend it rather than hoard it for no return, thus increasing ‘growth’. Japan has been doing this for years as has the ECB on behalf of the Euro and both are in deep do-dah. The US Fed can’t decide what they want to do and the BoE looks like its planning to join in using Brexit as a an excuse. All these policies actually do is bring forward demand so what we would have spent next year we spend today – but what happens next year??

    If you think things are bad now, just wait for rates to go negative – thats where you get to pay the banks to ‘hold’ your money. If you don’t fancy that much and decide to take it all out in cash and put it under the mattress, that would cause a run on the banks (there isn’t anything like enough ‘real money’ to go around). The Governement will then tell us that cash is an anacronism used only by Drug Delaers and Terrorists, ban it, and tell us we have to use digital money only. This means they will be able to charge us anything they want to ‘hold’ our money (now totally in 0’s and 1’s in a computer somewhere, so not really holding anything). All the signs are there. No, I don’t wear a tin-foil hat – read the financial press – its all there.

    • Julia Marsh

      It is frightening. Also I can’t see the logic behind the idea that the lower the rates the more people will spend – it just makes me tighten my belt still further to try to conserve what I have! If all the banks lower their rates I am going to turn to peer to peer lending with Zopa which I have been thinking about for a while.

      • PeterB

        Belt tightening is exactly what’s happened in Japan where they are trying to save MORE. I think the logic (if you can call it that) is that if there is no incentive to save, people will just spend instead (particularly with cheap credit made possible by low rates). It just moves the problem up a few years. Safe investments like Goverment Bonds are offering nothing (or less than nothing in some places). P2P may work but that’s market driven so may also drop if people can get cheaper credit from elsewhere. Value Equities or Corporate Bonds if you’re feeling adveturous. Good luck.

        • Julia Marsh

          Seems stupid to me to spend more when you are saving less! You would soon have nothing left to live on, especially retired people. I understand their rationale but I don’t think it works that way as you have demonstrated by the Japan example. I do have stock market investments and a corporate bond holding but I want to keep some cash too. And you are right, Zopa’a rates have dropped from what they were a few years ago. Still better than the banks though.

      • Suebryer Suebryer

        I agree Julia this just makes the cautious even more cautious and reign in all spending so its a viscious circle if we stop spending the economy suffers unemployment rises and we get even less on our savings and businesses go bust. the Cental banks have got us stitched up there is little incentive for entrepreneurs or savers. perhaps we could go back tobarter? real assets are at least tangible lol xxx

      • juani

        Agree. Peer to Peer is riskier but have been investing with a couple of companies for two years now and no problems – but their rates are dropping!

  • GMan

    I saw the “writing on the wall” some time ago and pulled as much of my money out of the banks as I could and put it in Premium Bonds, Peer to Peer lending, Gold, Silver, Whisky and a few other things. The one exception was the Santander 123 account as it gave me a return that beat inflation but now it is going to struggle so I’m going to have to rethink this.

    If you are wondering how I got on with the list above, the best performing investments are P2P and Whisky (but you have to know what you are buying). I will still keep my premium bonds though as a) there is almost no risk to the funds and b) I do win something most months and you never know, I could get lucky. Silver has performed really well but the UK VAT essentially kills your profit, gold has made less gains but has no VAT on some items so it evens out to lower returns as well. Holding physical metal though is more of an ultimate insurance policy and really for those worried about when money is 0’s and 1’s in a server somewhere that a government controls.

    One form of saving that gives you 20% is Pensions but the government is not very keen on promoting this and would rather you spend your cash instead to make the GDP figures look good. After the recent changes to Pensions these have essentially become a long term notice savings account and with no incentive to spend or stick money in a bank this could be the answer for many people. That spare £1000 would instantly change to £1200 for standard rate tax payers, then you add returns on top – fees = a much better rate of return + you are saving for your future

    • Julia Marsh

      That is all great and I do contribute to a pension every year – what is more it has now become a very efficient inheritance tax planning tool. However I need savings I can get my hands on too and that is why I am thinking p2p with Zopa.

    • Perilous Poozer

      Many financial advisors advise keeping 10% of one’s portfolio in gold. Unfortunately, many of them are so naive that they recommend holding synthetic ETFs. It has to be physical metal, IMO, because literally hundreds of synthetic gold ounces exist for every physical ounce, so the synthetic market is just for day traders and not for use as insurance.

  • Jess

    Will they be reducing the variable mortgage rate then? I haven’t had a letter

  • juani

    Have had accounts with Santander for years but will be moving on before November. New interest minus the fees plus the cashbacks will knock me back to below 1.3%. Agree with John that we should all show Santander what we think of them.

  • Ray Dunkley

    well 13 months ago i bit the bullet and cashed everything in and scrapped together enough to purchase 1 off 12.5 kg bar of gold i am happy to say i am now £225,000 better off very happy

  • Rosalind Stead

    Definitely a good idea John.

  • Steve

    totally agree John – santander will be losing my account too. Why should I keep a large amount of money with them for no real benefit. I work for a bank and I think its a disgrace that the penalize small savers like us while paying directors huge salaries and making huge profits – the low level staff and savers get nothing but we keep the banks stable

  • gameboy

    Problem is the banks don’t need our money that’s why the interest rate is so low. They get the bulk of their money from the government under the Funding for Lending Scheme (FLS) at low interest rates. Also you could win £1m (tax free) with premium bonds not £500,000 as stated above.

  • Cinzia

    I certainly agree with John. I am so fed up trawling the internet every week looking for a decent interest rate on my ISA. Santander have the use of my money which is a considerable amount & gives next to no interest for the use of. If i knew somewhere else to put it which would make better interest, i would remove it!

  • Malcolm.CM13

    It’s because they trawl the net & found out that we have nowhere better to put it that they’ve lowered their rate
    As for taking it all out & putting it into Premium Bonds, sounds like a good idea John, at least some of us would end up with a bonus comparable to some of the bank bosses!

  • Perilous Poozer

    1.5% is a bit of a kick in the teeth compared to 3% but it still beats what you can get elsewhere on a low-risk liquid investment of £20k. The rates on savings everywhere are being slashed as we speak. I’m keeping my 123 account with the max of £20k in it. The cashback payments offset the monthly charge.

  • Perilous Poozer

    The system has to be engineered to keep interest rates low because the Government, on our behalf, is so indebted. The national debt is about £26k for every man woman and child in the country. If rates go up and the Government has to print the money to pay the interest, then we will have a currency crisis and massive inflation. Of course it’s not just the UK that has this problem.

  • Brian Coyle

    Where does it say ‘£500,000 as stated above’, apart from nowhere??

  • gameboy

    They changed it – was £500,000 in first post…

  • Brian Coyle

    When exactly was it changed?

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