The Clean Air Action Group (CAAG) is well aware of the fact that utility charges (energy, water and sewage service, communal waste collection, chimney sweeping) are a considerable financial burden on the majority of households, therefore CAAG is committed to reduce this burden. However, it is also convinced that the ‘utility price cut’ for households by the Hungarian government in 2013 are nothing more than cosmetics concealing chronic structural failures, and as such, they cannot be sustainable in the long run.

In the past 20 years we have had plenty of opportunities to experience the ‘generosity’ of the ruling governments (irrespective of their political affiliation) in the half a year preceding parliamentary elections only to see harsh austerity measures affecting the people in the years after election. This time is not an exception, either. This is easy to see if one considers the following. Voluntary intervention in the prices goes against the laws of economy, and leads to a chaos which will impose heavy burdens on society in the future. The 10 % ‘utility price cut’ implemented by the government in January 2013, and the additional 11.1 % in November does not reduce the costs of energy and other utility services but only the consumer prices. The prices not reflecting the costs will, however, cause significant extra costs for society.

The household ‘utility price cut’ brought to effect by the government mostly benefits affluent households, making it just another redistribution of incomes from the poorer layers of society to the wealthier ones. This, added to the government’s other measures with similar consequences, aggravates social tensions which have been escalating since the change of the political system, and which can even lead to an explosion or mass emigration (which we already experience). This still holds true even if many low-income families regard the reduction of their utility bills by several thousand Forints per month as a relief. It is widely perceived now that the effect of the ‘utility price cuts’ is zeroed by the increased prices in several other areas.

The government’s justification for the ‘utility price cuts’ is partly that this will stop foreign owned companies making excessive profit and taking it out of the country. The Clean Air Action Group has long been an advocate of fighting off the outflow of income from the country (this was the reason why CAAG opposed earlier the selling of energy and other utility service companies to foreign firms), nevertheless, it is highly questionable whether the ‘utility price cut’ contributes to this pursuit.

Most foreign owned companies can be found among the electricity and gas providers. These companies did take out significant sums from the country in earlier years. However, this activity has been restricted by the special taxes which were imposed on these companies in 2008 and in 2010, and which are still in force. In case such a phenomenon still exists in spite of all these steps, it should be controlled by additional taxes and regulations (such as appropriate maintenance and cost-cutting and modernisation requirements).

Comparing domestic household prices of electricity and gas to those of the other countries of the European Union, it can be seen that these prices are lower in Hungary than in most EU member states. (This is even more so if we deduce from the price the 27% VAT which, on the other hand, is far the highest in the EU.) Therefore, there is no such thing as extremely high excessive profit, and also it is far from the 20% by which the government reduces consumer prices in total.

Due to the ‘energy price cuts’, energy efficiency investments pay off later, and the competitiveness of renewable energy sources deteriorates. ‘Energy price cuts’ are consequently extremely unjust towards those all who have invested in these in the recent years. It is also unfair towards innovative businesses which had prepared to do such activities. In the future, for instance, installing solar panels will be less profitable since electricity from the grid has become cheaper. The return period of energy efficiency investments, such as renovation of buildings or shifting to more modern equipment, will also expand. This will result in and even lower investment willingness.

Other public utility services affected by the ‘energy price cuts’ (water utility services, waste collection services) are mostly domestically owned so it makes no sense to speak about excessive profit taken out of the country. The losses of these companies, of which several are publicly owned, are often covered by local governments leaving less money for other activities that would benefit the residents.

Lower prices encourage higher energy use (which results also in higher environmental pollution). Thus, as Hungary’s energy use extensively relies on import, the ‘energy price cut’ increases our energy dependency and the outflow of income from the country – the very phenomenon which the government claims to prevent with the ‘energy price cut’.

A lasting reduction of energy prices can be attained not by an artificial lowering of energy prices and other utility fees, but by improving efficiency and cost effectiveness, and by eliminating wasteful consumption (often resulting from insufficient funds or pressure of necessity). EU and domestic funds should be used this way. Furthermore, economic and other regulators should be modified so that they encourage ever more efficient use, environmentally aware behaviour, and use of domestic resources. Modern public services building on local resources would keep the purchasing power, create more jobs, and at the same time, the wages would be more able to cover living costs.