The taxpayer faces a £4bn bill if a "big six" energy company goes under

5 questions answered.

Under newly proposed plans by Ed Davey the tax payer could foot the bill if one of the big six energy companies goes bust. We answer five questions on the proposed contingency plans.

What is Ed Davey proposing?

Energy Secretary Ed Davey is proposing to intervene quickly should one of the big six companies - EDF of France, E.ON and npower of Germany and Scottish Power, owned by Iberdrola of Spain, Centrica and Scottish & Southern Electric – go bust.

The "worst case scenario" plans, outlined in an Energy Department consultation paper open for comments until March 15, could result in household bills rising by between £7 and £32 a year on average over the period, equivalent to a maximum contribution of £4bn on the basis of 25.5m households in the UK, according to The Telegraph.

The provisions would enable the Government to intervene and continue to fund any company about to go bust and control the cost passed onto the consumer and maintain market sustainability. The rest of the industry would be expected to maintain supplies should this happen.

What is the likely-hood one of the big six companies could going bust?

It is not thought to be very likely that one of these companies would go bust any time soon and their commitment to the UK is not being questioned. It is thought the government is brining in these extra precautions because it does not want to have a repeat of the banking fiasco in the energy sector.

Does the government not already have provisions in place?

It does in the form of the 2011 2011 Energy Act which has already introduced a special administration regime to provide protection for the National Grid and the electricity and gas distribution networks it operates, as well as for the rail and water industries. However, Davey feels these provisions are not robust enough to cope with the mayhem that would ensue in the market if one of the big energy providers went bust.

What has the Department of Energy said?

An Energy Department official told The Telegraph: “It is extremely unlikely that any of the large energy suppliers in the UK would become insolvent. None the less, the Government believes that it is prudent to have in place a framework that will ensure the continued operation of a major supplier until its customers can be transferred to other partners.”

What do the energy companies think about these new provisions?

EDF has said it is broadly supportive of the proposals, while others are yet to comment

Photograph: Getty Images

Heidi Vella is a features writer for

Show Hide image

The strange death of boozy Britain: why are young people drinking less?

Ditching alcohol for work.

Whenever horrific tales of the drunken escapades of the youth are reported, one photo reliably gets wheeled out: "bench girl", a young woman lying passed out on a public bench above bottles of booze in Bristol. The image is in urgent need of updating: it is now a decade old. Britain has spent that time moving away from booze.

Individual alcohol consumption in Britain has declined sharply. In 2013, the average person over 15 consumed 9.4 litres of alcohol, 19 per cent less than 2004. As with drugs, the decline in use among the young is particularly notable: the proportion of young adults who are teetotal increased by 40 per cent between 2005 and 2013. But decreased drinking is not only apparent among the young fogeys: 80 per cent of adults are making some effort to drink less, according to a new study by consumer trends agency Future Foundation. No wonder that half of all nightclubs have closed in the last decade. Pubs are also closing down: there are 13 per cent fewer pubs in the UK than in 2002. 

People are too busy vying to get ahead at work to indulge in drinking. A combination of the recession, globalisation and technology has combined to make the work of work more competitive than ever: bad news for alcohol companies. “The cost-benefit analysis for people of going out and getting hammered starts to go out of favour,” says Will Seymour of Future Foundation.

Vincent Dignan is the founder of Magnific, a company that helps tech start-ups. He identifies ditching regular boozing as a turning point in his career. “I noticed a trend of other entrepreneurs drinking three, four or five times a week at different events, while their companies went nowhere,” he says. “I realised I couldn't be just another British guy getting pissed and being mildly hungover while trying to scale a website to a million visitors a month. I feel I have a very slight edge on everyone else. While they're sleeping in, I'm working.” Dignan now only drinks occasionally; he went three months without having a drop of alcohol earlier in the year.

But the decline in booze consumption isn’t only about people becoming more work-driven. There have never been more alternate ways to be entertained than resorting to the bottle. The rise of digital TV, BBC iPlayer and Netflix means most people means that most people have almost limitless about what to watch.

Some social lives have also partly migrated online. In many ways this is an unfortunate development, but one upshot has been to reduce alcohol intake. “You don’t need to drink to hang out online,” says Dr James Nicholls, the author of The Politics of Alcohol who now works for Alcohol Concern. 

The sheer cost of boozing also puts people off. Although minimum pricing on booze has not been introduced, a series of taxes have made alcohol more expensive, while a ban on below-cost selling was introduced last year. Across the 28 countries of the EU, only Ireland has higher alcohol and tobacco prices than the UK today; in 1998 prices in the UK were only the fourth most expensive in the EU.

Immigration has also contributed to weaning Britain off booze. The decrease in alcohol consumption “is linked partly to demographic trends: the fall is largest in areas with greater ethnic diversity,” Nicholls says. A third of adults in London, where 37 per cent of the population is foreign born, do not drink alcohol at all, easily the highest of any region in Britain.

The alcohol industry is nothing if not resilient. “By lobbying for lower duty rates, ramping up their marketing and developing new products the big producers are doing their best to make sure the last ten years turn out to be a blip rather than a long term change in culture,” Nicholls says.

But whatever alcohol companies do to fight back against the declining popularity of booze, deep changes in British culture have made booze less attractive. Forget the horrific tales of drunken escapades from Magaluf to the Bullingdon Club. The real story is of the strange death of boozy Britain. 

Tim Wigmore is a contributing writer to the New Statesman and the author of Second XI: Cricket In Its Outposts.