Could a windfall tax on energy- supply companies turn round the fortunes of the Labour government? The general secretary of the TUC, the leader of the country's largest union and more than 90 Labour back-bench MPs have now called for a tax on the utility companies' profits in the run-up to a fuel-poverty package to be announced next week. Gordon Brown is standing firm against the clamour for one-off payments to help the hardest-hit households meet the cost of rising fuel bills, but a windfall tax has not been ruled out and could fund the government's energy efficiency measures to reduce gas and electricity bills. The question is whether it can help those most in need sufficiently quickly. Increases in the winter fuel payments of £50 for the over-60s and £100 for the over-80s had already been announced before the latest round of price rises, and further additions are unlikely. Pensioners on low, fixed incomes are vulnerable, but that is not true of everyone who receives winter fuel allowance, while others at risk, including low-income families with disabled or chronically ill members, do not receive extra help. The prospect of using a windfall tax on companies which increased their dividends by 19% last year and have just announced large price rises (of an eyewatering 35% in the case of British Gas) to fund an assistance package for the hardest-hit has such obvious voter-appeal that its back-bench endorsement is hardly surprising. The political campaign will have gained some momentum from the Prime Minister's recent record of succumbing to political pressure, as on measures to ameliorate the effects of abolishing the 10p tax rate, but there was an echo of the Iron Chancellor in the "no gimmicks, no giveaways" message in his address to CBI Scotland. The investment in "making every home in Britain more energy efficient, thus reducing bills not just temporarily, but permanently" could provide a long-term reduction in energy costs, but talks with the utility companies on increasing their contribution to energy efficiency programmes are apparently stalled. A windfall tax is the final weapon in the government's armoury against swingeing increases in energy costs. The political and social case for it is clear; the strategic one problematic. The argument against is that utility companies will react by refusing to invest in infrastructure and, with four of the major suppliers under foreign ownership, that is increasingly likely. That makes the alternative of requiring the companies to finance a large-scale insulation programme more attractive. A government whose popularity is plummeting ruling out the popular option is running the risk of committing political suicide. Putting long-term benefits over short-term populism could also be seen as the principled course. It is a high-stakes political gamble, but it could succeed if it extracts sufficient additional money from the utility companies to fund a programme of insulation and energy efficiency, which is accurately directed towards the most vulnerable households in time to reduce bills this winter.
Could a windfall tax on energy- supply companies turn round the fortunes of the Labour government? The general secretary of the TUC, the leader of the country's largest union and more than 90 Labour back-bench MPs have now called for a tax on the utility companies' profits in the run-up to a fuel-poverty package to be announced next week. Gordon Brown is standing firm against the clamour for one-off payments to help the hardest-hit households meet the cost of rising fuel bills, but a windfall tax has not been ruled out and could fund the government's energy efficiency measures to reduce gas and electricity bills. The question is whether it can help those most in need sufficiently quickly. Increases in the winter fuel payments of £50 for the over-60s and £100 for the over-80s had already been announced before the latest round of price rises, and further additions are unlikely. Pensioners on low, fixed incomes are vulnerable, but that is not true of everyone who receives winter fuel allowance, while others at risk, including low-income families with disabled or chronically ill members, do not receive extra help. The prospect of using a windfall tax on companies which increased their dividends by 19% last year and have just announced large price rises (of an eyewatering 35% in the case of British Gas) to fund an assistance package for the hardest-hit has such obvious voter-appeal that its back-bench endorsement is hardly surprising. The political campaign will have gained some momentum from the Prime Minister's recent record of succumbing to political pressure, as on measures to ameliorate the effects of abolishing the 10p tax rate, but there was an echo of the Iron Chancellor in the "no gimmicks, no giveaways" message in his address to CBI Scotland. The investment in "making every home in Britain more energy efficient, thus reducing bills not just temporarily, but permanently" could provide a long-term reduction in energy costs, but talks with the utility companies on increasing their contribution to energy efficiency programmes are apparently stalled. A windfall tax is the final weapon in the government's armoury against swingeing increases in energy costs. The political and social case for it is clear; the strategic one problematic. The argument against is that utility companies will react by refusing to invest in infrastructure and, with four of the major suppliers under foreign ownership, that is increasingly likely. That makes the alternative of requiring the companies to finance a large-scale insulation programme more attractive. A government whose popularity is plummeting ruling out the popular option is running the risk of committing political suicide. Putting long-term benefits over short-term populism could also be seen as the principled course. It is a high-stakes political gamble, but it could succeed if it extracts sufficient additional money from the utility companies to fund a programme of insulation and energy efficiency, which is accurately directed towards the most vulnerable households in time to reduce bills this winter.
