Germany's energy cost relief packages not well targeted - researchers

Energy cost relief support for low-income households is not targeted enough to alleviate their burden, a new report by the German Institute for Economic Research (DIW) in Berlin finds. According to their calculations, the average private household in Germany will have to spend 2.1 percent more of their net income on energy in the medium term. Without the state relief, the figure would be 3.4 percent. For the poorest 10 percent of households, however, the energy price increases account for 6.7 percent of net income. And even when taking into account the relief, there is still a net burden of about 3 percent, the researchers say. In contrast, the richest 10 percent of households only have to spend an average of 2 percent more on energy in relation to their income; since they also benefit from state aid, the bottom line is only 1.3 percent.

The federal government’s 24-billion-euro relief package so far contains the abolition of the renewables levy on power prices, higher social benefits, lower income taxes, an energy price flat rate, a reduction in fuel tax and a discounted public transport ticket. Whilst low-income households are set to benefit from these the most in relation to their net income, the overall burden of rising energy prices will still hit them more than richer households, the researchers say. They argue that high-income households should not be included in the relief measures and that in the medium term taxes on very high incomes and assets should be raised.