There’s something unintentionally amusing about Neal Lawson including himself in a list of “leading figures from civil society”.

“urges the government to urgently introduce a new windfall tax the revenues from which being ring-fenced and targeted at homes in fuel poverty and used to start an adequately funded programme of home insulation to protect people from future price rises.”

This is saner than most “we’ll give you money to use more fuel. Environment? Whassat then?” schemes. Good. Although the challenging bit will be ensuring that the poorest people’s (i.e. rented) homes get insulated without it becoming a massive boondoggle for slum landlords.

You have got to be joking me.

I remember reading an excellent demolition of the notion of a new windfall tax on their very website a few months back, and yet here we are going over old ground. How very depressing.

Windfall taxes won’t work because:
(a) almost every utility company is foreign-owned, which was not the case in 1997. As energy firms are mostly foreign-owned, it is totally unacceptable to start taxing them on the basis of their profits from abroad. Centrica, the owners of British Gas made about £2 billion profit last year but their profits at British Gas fell by about two-thirds over the same period.
(b) energy companies are supposed to be investing in new and cleaner technology and will simply cut back their research budget instead of cutting prices
(c) energy firms can also raise their prices if the government goes after their profits, meaning that we end up paying more if you tax the companies more
(d) if you slap massive taxes on energy firms they will bugger off and leave this country, leaving us even more screwed than we already are in terms of energy production

In short, a windfall tax is economically and politically unjustifiable.

http://www.lettersfromatory.com

a is an utter red herring. you’d tax them on profits from UK energy supply – even those companies which don’t disclose this in their public accounts will disclose this in their accounts to HMRC

b is more of an issue – not so much on research per se, but on investment in new, greener plant. The question is, if excess profits are being made, who’s making them. If they’re on energy supply (ie buying wholesale electricity and gas and selling to customers), then taxing them doesn’t affect investment. if they’re on generation (ie buying coal and turning it into electricity), then it does.

c is possible, although it’d be a politically insane move by the companies (‘your prices are too high, so we’re taxing your profits’ is not normally followed by further price rises).

d is nonsense – what, you think they’re going to jack up their power stations and wheel them off to Germany?

When international oil and gas prices were at all-time highs, the argument for a windfall tax was utter nonsense, as the windfalls accrued to Gazprom and Saudi Aramco not E.ON and EdF. Now they’re lower and domestic prices haven’t fallen, the point is more convincing – unless you think the current low prices are a very short-term blip and things are going to get tough again in the next couple of years.

“Leading figures from civil society” – I like it.

Taxes are not paid by companies; they are paid by people.
Those people are shareholders, customers and/or employees.
It seems extremely unlikely that 100% of any increased tax would be borne by shareholders (many of whom will themselves of course be prospective pensioners).

And I’m not worried about whether any new investment is “green” or not.
I’m just worried about what the supply situation is going to be in 10 years time.

“Taxes are not paid by companies; they are paid by people.
Those people are shareholders, customers and/or employees.”

Well, seeing as the utility companies were stolen from the people and given away to shareholders at a fraction of their real worth, I would say that it is about time those shareholders took a hit. The privatisation of energy and water is one of the biggest scams going. The public is now being fleeced by the energy and water companies and has been for the last 15 years.

The ludicrous payouts to shareholders has been nothing but criminal. The companies have not invested anything like as much as they should or could have in their industry’s. They have just paid out billions to greedy shareholders, while inventing more and more complex ways to steal money from their customers.

Sally – shockingly – I agree to some extent.
Regulation has been a little on the soft side…but that is in government control.

(b) energy companies are supposed to be investing in new and cleaner technology and will simply cut back their research budget instead of cutting prices

Oh dear… or maybe they could be cut from the absurdly large bonuses these companies give to their CEOs. I like how suddenly the Tories care about R&D in favour of green technologies, and are using that as an argument to argue against a windfall tax. I’d first like to know how much money in R&D is actually being spent in that area. And is it more important than fuel poverty and the number of people who will have to scrimp and save just to avoid feeling extremely cold? Is that ‘Compassionate Conservatism’?