Freethinkeruk’s Weblog

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Energy Windfall Tax

Pressure from various quarters, seems to be building  on the Government to charge a ‘windfall tax’ on the energy suppliers. They have after all made enormous additional profits from the rising costs of oil and gas, even though when these costs have decreased, the price to customers has not been reduced.

The false argument is that this windfall tax would be used to reduce fuel costs in particular to the most vulnerable. The argument is a false one because (a) the Government would be unlikely to pass all this on to consumers (b) the suppliers would simply increase their prices to make up the shortfall in their balance sheets (c) any reductions passed on by Government would be a one off and we would be in the same position twelve months from now.

It was said at the time that when Margaret Thatcher privatised the energy industry that she was selling off the family silver and how right they were; the chickens are now coming home to roost. What has been done though, can be undone. Our Nation should not be dependant on private companies, many of them foreign owned, for it’s vital energy. The time is right to re-nationalise them. One wholly State owned energy  company would have enormous buying power and with no investors requiring an annual large dividend payout prices would fall dramatically and be under greater control by the end users, the voting public.

The cost in financial terms would of course be great but would represent an investment in the future of our Nation. It may well require that a fresh look is taken at other drains on the Exchequer such as do we actually need several billion Pounds worth of Aircraft carriers and do we really see a use for billions of Pounds worth of Trident submarines or billions spent on useless Identity Cards?

It could be done, it should be done, all it needs is a leader and a government with vision and bravery. Sadly therefore it is not likely to happen but here’s hoping.

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6 thoughts on “Energy Windfall Tax

  1. The imposition of a windfall tax on the energy companies is indeed a short-term solution and a penal approach to companies that will have to invest in new technologies to secure our energy for future generations.

    Perhaps the approach should be to engage and encourage these companies to use their carbon off-sets in this country to reduce energy waste, rather than in far off countries. That way the methodolgy employed is positive, the public benefit directly through reduced bills and we have a real chance of achiving our emissions targets.

    I am no expert on the carbon trading scheme, but surely this is one option that could be considered?

  2. I agree that these companies should use their carbon off-sets in this country but I can’t see how this would reduce the bills. Their only motivation is profit whereas a nationalised energy industry’s motivation should be to serve the people at the lowest possible cost.

  3. My proposal would be that the energy companies invest more in energy conservation in the home, by expanding on the current initiatives of more efficient central heating (an efficient boiler can save as much as 35% in gas), low energy bulbs, insulation and of course, education. This would offer a tangible saving on energy costs within the home.

    I agree that energy companies are driven by profit, but governments rarely make good bosses. Therefore, you have to balance the efficiency offered by private enterprise, against the inefficiency normally demonstrated through government ownership. In the case of the latter, this would inevitably be passed onto the consumer by way of higher prices. Energy companies make a net profit of 3 or 4%, it wouldn’t take much for a government lead energy industry to lost the equivalent through inefficiency, over-staffing and errors.

    I would not discount nationalisation of such an important resource. But I have very serious misgivings in the government’s (whichever party) ability to manage such a massive organisation. Just my personal thoughts you understand.

  4. You make some good points UK Voter and your ‘personal thoughts’ along with others are most welcome, as it is only from these that change can happen.

    A question springs to mind though. Why would the energy companies use their profits to ‘invest’ in home energy conservation? This would result in lower consumption, therefore lower profits. It would be like asking turkeys to vote for Christmas.

  5. It is a fair point and I suspect they will put their prices up to compensate, albeit it would not have to be by so much, because of course, they won’t have to buy the gas wholesale.

    The only way this will work is if Ofgem is given the power to monitor tariffs to ensure that the the recovery process isn’t excessive. the bottom line, is one way or another, we will all have to pay, someone always does, and it is usually the bill payer, the tax payer or both!

  6. Indeed, Ofgem should have power to set any increase rather than simply monitor. My electricity supplier is EDF (Energie De France) and prices have gone up around 25%. In France their Ofgem equivalent set the latest rise at 2%.
    A watch dog without teeth is as much good as a hampster.

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