Five questions answered on British Gas’s 2012 profit rise

"So no, I don't think customers will be celebrating."

British Gas today announced a profit rise for 2012. We answer five questions on the energy company’s rising profits.

By how much exactly did British Gas’s profits rise in 2012?

The company said it profits rose 11 per cent, with gas usage up 16 per cent.  

British Gas’s parent company, Centrica, also reported an adjusted operating profit of £2.7bn for 2012, up 14 per cent from 2011.

Where does British Gas say this rise comes from?

The company attributed the profit rise to customers turning up their heating in the cold weather and not to the 6 per cent gas and electricity prices rise it enforced in November of last year.

Chief Executive of Centrica Sam Laidlaw speaking to the BBC said that the firm’s profit margins per household were actually down and that the company had made just under £50 profit per customer household.

Have Centrica’s dividends to shareholders risen?

Yes, by 6 per cent. The company is also returning £500m to them.

What are the company’s critics saying?

Ann Robinson, director of consumer policy at the price comparison website Uswitch, told the BBC: "Seven out of 10 of us actually went without heating at some point during this winter and over a third of us have reported that we feel it's actually affected the quality of our life and also our health.

"So no, I don't think customers will be celebrating. I think they'll be wondering why on earth British Gas had to take this move in November when they are making such high profits."

What is Centrica’s saying in response to this criticism?

Also speaking to the BBC Chief Executive Sam Laidlaw said he recognized that times were “difficult” for UK households but insisted British Gas couldn’t have done any more to shield customers from price rises.

He added that "a 5pc margin on the business is the sort of margin we require,” and that Centrica provided a “vital source of energy to the UK.”

"Centrica is one of the UK’s most important companies, employing around 40,000 people, keeping homes warm and well lit, securing future energy supplies, innovating and investing and paying substantial amounts of tax to the Treasury each year," Mr Laidlaw said.

"We also have over 700,000 individual shareholders, all of whom benefit from the dividends the Company pays. Through our larger shareholders, many of them pension funds, our dividends also feed into the retirement savings of millions of people. It is important therefore that the group continues to grow and invest." Laidlaw said.

Photograph: Getty Images

Heidi Vella is a features writer for Nridigital.com

Photo: Getty
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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.