OPINION: Swiss government must act so families are not afraid to turn heating on this winter

Fearing a winter of discontent, governments all over Europe are moving to cushion the impact of surging energy prices. Swiss households have been told they should be able to handle the situation without hardship. Clare O’Dea asks whether this is realistic.

OPINION: Swiss government must act so families are not afraid to turn heating on this winter
This picture taken on September 24, 2019 from the top of the Saleve mountain shows the public lighting of the Greater Geneva. (Photo by FABRICE COFFRINI / AFP)

While other European countries are responding urgently to the cost-of-living crisis with direct payments and price caps, the Swiss have been told to put the lids on their saucepans when cooking.

It really is the case that an energy efficiency campaign is the extent of government intervention so far. That’s if you don’t count emergency credit to the tune of billions of francs made available to the country’s largest power companies this month.

READ ALSO: What the Swiss government is asking you to do to save energy

There is now a financial safety net in place for the power sector but nothing yet for the country’s more vulnerable families, facing the dual challenge of rising inflation and energy bills. Hopes are now pinned on a decision next month. The government has promised to review the situation after its energy price task force has reported back.

Electricity operators announced their new pricing structure for electricity in 2023 on August 31, showing a greatly varying pricing patchwork depending on location. The increase for a typical household is calculated to be 27 percent, corresponding to an annual bill of 1,215 francs, or 261 more than the current level.

READ ALSO: Swiss government confirms ‘sharp increase’ in electricity prices

Not that dramatic, you might think, until you look into the massive differences at a local level. Providers who don’t produce their own kilowatts are in the expensive situation of having to purchase all their electricity at historically high prices and pass those on to customers.

It is little comfort to know that the national average is 27 percent when you are unlucky enough to live somewhere like Churwalden, Graubünden or Aarberg, Bern, where the increase is twice that rate. As domestic customers are tied to their local provider, there is no alternative for those caught in bizarrely high price hikes. Rates per kilowatt hour vary dramatically, as this official interactive map shows.

The figure of 250 francs monthly has been thrown around by different political parties, either as a direct payment or tax break. However, a universal payment makes little sense, given the differences in income and prices. Therefore, any state or cantonal help should be as targeted as possible.

This will be a tough winter for those on a tight budget, with price increases across the board and inflation at 3.5 percent. Not only energy prices but the cost of petrol and diesel, health insurance, mortgage repayments or rent, household goods and food will continue to increase in 2023.

Although Swiss consumers are better off than those in some of the worst-hit European countries, notably the United Kingdom, where energy prices have tripled and inflation has reached 10 percent, lower-income households will still need some state aid. And they are still waiting for reassurance from the government.

Switzerland’s electricity grid is intertwined with Europe’s. Image by Michael Schwarzenberger from Pixabay

Despite being one of the world’s most successful economies, one in seven people in Switzerland live in poverty or is at risk of poverty. As pointed out by the charity Caritas, additional monthly expenses of 50 or 100 francs can create serious problems for people who are just scraping by.

Time is short between now and the end of the year to put something in place for the worst affected by the crisis. Knowing that something is in the pipeline would take away a lot of stress for low-income households.

The other at-risk group are those who earn too much to qualify for regular social assistance, such as subsidised health insurance, but too little to cope with ever-increasing outgoings. Whatever help is available should be delivered as swiftly as possible with a minimum of red tape. The pandemic showed, on a much broader scale, that this kind of state intervention is workable.

With such a high share of renewable energy covering domestic electricity demand in Switzerland – close to 80 percent – Switzerland is in an enviable position. Its reliance on imported gas is relatively low.

All the more reason why the Federal Electricity Commission Elcom should make sure that the consumer is protected from extra charges. The Swiss Foundation for Consumer Protection has already drawn attention to this problem and called for Elcom to take a closer look at and correct unjustified price increases.

This is no easy task, with hundreds of providers active in the market. But, with the cooperation of the government, cantons and communes, there are changes that can be made to the various tariff structures that would make a difference.

One suggestion is the removal of the set basic charge imposed by some companies so that customers are paying for their true level of electricity use. This would also increase the incentive to be energy efficient. Bills could also be trimmed by reducing grid connection fees and municipal duties.

This time of uncertainty in the world economy calls for innovation and flexibility on the part of decision-makers, with policies that provide reassurance and put the people’s well-being first.

If Swiss families and pensioners are afraid to turn on the heating this winter, it will be a damning indictment of the country’s political leadership.

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OPINION: Why Switzerland needs to scrap its fabled 1,000 franc notes

If the Americans can get by with $100 bills, the British manage with £50 and EU citizens now mostly €200, why do the Swiss need such a large denomination? The answer is, they don’t, writes Clare O'Dea, as she explains why it should be binned.

OPINION: Why Switzerland needs to scrap its fabled 1,000 franc notes

The existence of the 1,000-franc note, so blatantly open to misuse, is justified with platitudes about the Swiss liking cash.

Apparently the 1,000-franc note is quite pretty but I can’t say for sure as I’ve never seen or touched one. With the exception of Singapore and Brunei, no other country sees fit to issue such a large-denomination note for the simple reason that it’s not needed for legitimate business.

Financial secrecy is obviously a big part of the appeal of the 1,000-franc note. To say otherwise is not really credible. Cash in this condensed form is anonymous, untraceable, easily transportable, easily concealed.

As Bradley Birkenfeld said in a 2015 CNBC interview, “I mean you could put half a million in your pocket, no problem”. Remember that name? Birkenfeld was the (in)famous UBS whistleblower who exposed the bank’s shady practices to the US authorities in 2007, triggering the dismantling of Swiss banking secrecy.

The Swiss National Bank (SNB) explains that the big note is used as a “store of value” to a considerable degree. What does that mean? The SNB’s own research shows that most people keep less than 1,000 francs in cash at home. Are we talking about storing value under the mattress or in a safe deposit box?  Who does that and for what reason?

Look, I’m sure there are people with 1,000 notes squirrelled around the place who run their finances in a totally clean and honest way. The latest SNB survey on payment methods found that half of the population had been in possession of at least one 1,000-franc note over the previous two years. The note is especially popular among men over the age of 55

But inevitably there are tax evaders, money launderers and other criminals who find the big notes come in very handy. The €500 note was scrapped after 17 years mainly because of its popularity with criminal gangs in the EU and beyond, to the extent that it had become an embarrassment.

The €500 note is still legal tender but no new notes have been issued in the euro zone since 2019, following the decision by the European Central Bank. The move came after serious concerns were expressed by academics, international police agencies and EU finance ministers.

When production of the €500 note officially ceased, the largest denomination note accounted for 20 per cent of the value of all euro notes in circulation. Doesn’t it seem odd that 60 per cent of the value of all francs in circulation are in 1,000-franc notes? That’s 9.4 per cent of all physical notes. Something doesn’t add up.

I have heard people argue that 1,000-franc notes are popular for big expenses, like buying a car or jewellery. Or for paying big bills over the counter at the post office (this I have seen). Rumour has it that farmers like to buy livestock with the purple polymer and paper mix. Each to his own.

But these financial practices are fast becoming dated and are anyway not common enough to explain the volume of 1,000 notes in circulation. Yes, it’s official: cash is no longer king in Switzerland.

As recently as 2017, some 70 per cent of non-recurring payments were made in cash, purchases like clothes, the supermarket shopping, or restaurant meals, according to the SNB survey on payment methods. This had reduced to 43 per cent by 2020, the last time the survey was carried out.

The most recent data on payment behaviour comes from the Swiss Payment Monitor, a joint research project between the University of St. Gallen and the ZHAW Zurich University of Applied Sciences, which reported in August of this year.

The study found that the debit card remains the most frequently used form of payment for face-to-face business (34.8 per cent), followed by cash (33.2). Credit cards are less popular at 16.5 per cent. Meanwhile mobile payments are growing in popularity, increasing share from 1.5 per cent of transactions to 11.2 per cent over the past five years. 

What this boils down to is that people are perfectly adept at paying electronically in all kinds of ways and the role of the 1,000-note in retail or person-to-person purchases is far from essential.

While we’re on the subject of money, this month saw the release of the Credit Suisse Global Wealth Report, in which Switzerland emerged as the world’s richest country. The average wealth of adult residents in this country is 672,508 francs, up 5.4 per cent from the previous year. Assets include stocks and shares, pensions savings, and property.

In case you’re feeling left out, the median wealth per adult in Switzerland is 165,266 francs. That means half of the population possesses less than this amount. The figures are skewed upwards by a smallish number of mega rich individuals, with a little help from the 1.1 million millionaires in Switzerland. My guess is that these two groups have the most use for the 1,000-franc notes.

Reading between the lines, I sense some national pride in the attachment to this world-beating high denomination note. Swiss people like to hold cash – that’s our way. We also like our privacy – so what!

Not to spoil the fun, but all cultures need to be aware that just because they’ve always done something a certain way does not mean the practice has merit and is worth preserving. I recommend taking a long, hard look at the legitimacy of the fabled 1,000-franc note.