Jeff Salway: BBC should be embarrassed by blinkered probe into rising energy bills

IF THE BBC were to commission CBeebies to investigate the rapid rise in energy bills over the last few years, it would get a more thorough report than that churned out by Panorama.

Much has been said about the decline of the once peerless Panorama in recent years. A distinguished reputation for forensic investigations into issues that TV otherwise skims over has been tarnished by a series of unbalanced reports that would have embarrassed the Beeb’s children’s channel.

Last Monday was perhaps a new low, when the programme’s probe into rising energy bills contrived to ignore the biggest factor driving them up: wholesale gas prices.

Anyone would have thought the oil and gas industry had been given editorial control, such was the focus on the impact of renewables on energy bills.

There are numerous reasons why we’re bracing for the biggest energy bills on record over the winter. Renewables are a factor, as Panorama was at pains to point out, yet only one of many.

If there’s one thing that suppliers, the regulator and independent analysts agree on, it’s that higher wholesale gas prices have been the biggest single influence on energy bills in recent years.

Ofgem has estimated that wholesale costs are responsible for more than half our energy bills, with the recent spike caused by a surge in global oil and gas prices.

The disagreements start from that base, thanks to the failure of suppliers to reflect changing wholesale costs in domestic energy tariffs.

The BBC’s agenda is anyone’s guess, but an investigation into the energy market that fails to examine the tendency of the big six to raise their tariffs at the same time and by the same amounts – even while they pay different rates for their wholesale supply – is a waste of time.

BTL hits first-timers

THE summer green shoots in the Scottish housing market may be as good as it gets for this year, with the Royal Institution of Chartered Surveyors talking of an “early hibernation” after activity slipped last month.

But one area of the housing market is thriving – buy-to-let (BTL). Lenders advanced 46 per cent more in loans to BTL landlords in the last quarter than in the same period last year, while the number of loans given jumped by almost 40 per cent over the year. And with the squeeze on first-time buyers set to push demand for rental accommodation for some time yet, the BTL market is in the midst of a mini-boom.

No one can blame those with surplus cash and struggling to secure income from other sources for buying up first-time buyer properties to let out. But as BTL bounces back, the return to health of the wider housing market becomes more distant.

For those hoping to get a foothold on the property ladder, signs of a BTL revival are bad news. Firstly, investment landlords are helping support property prices at a time when they need to fall further to give more first-time buyers a chance of saving the deposits needed. And, as in the housing boom of the mid-noughties, homes that would typically be marketed towards first-timers are being snapped up by landlords, reducing the already limited stock of cheaper properties on the market.

So even more would-be buyers are renting for longer and trying to save the deposits they need. Yet healthy demand for let accommodation is driving tenant costs up, diverting more disposable income from savings to rents.

In a market where equity is everything, BTL investors have a huge advantage over first-timers – one that helped fuel the housing market boom of the mid-noughties.

That’s not to compare the latest increase in BTL lending with the patterns of five years ago and it has to be kept in some perspective. The dive in BTL lending was steep, with the bottom falling out of the market in 2008 and 2009.

But the growth needs to be eyed with caution and the lessons of the BTL boom absorbed. In parts of the south of England demand for rental property is such that sealed bids are now being used.

In Scotland rents have been rising consistently over the past two years. A thriving rental sector is vitally important and the Scottish Government is reportedly keen to encourage longer term renting.

It has to be sustainable though. That means a market where long-term renting of ten and 20 years or more becomes more commonplace, moving towards a continental model in which home ownership is not a national obsession (as David Alexander hints above).

But the BTL lending recovery will have a damaging affect on the housing market if it continues on the same track.

Tracker trouble

INVESTORS are piling into tracker funds like never before. Sales of the funds hit a record last month, with investors attracted by low costs and their perceived lower risk. It’s not so cut and dried, however.

Sectors such as banks and oil and gas account for a huge chunk of the FTSE, leaving investors exposed if those areas slump. And while two-thirds of actively managed funds regularly fall short, a good manager can ensure that risk is spread effectively and outperform a good tracker fund.

Their low costs make sense in this market (although you should look at the total expense ratio, not just the headline charge) but trackers are not the panacea in times of volatility.