A rant about windfall taxes...
Sep. 7th, 2008 08:18 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
rhythmaningThere has been a lot of talk over the past few months about the need (or otherwise) of the UK government to charge the energy companies – electricity, gas and oil – with a windfall tax.
Labour MPs, unions and even 70% of the public support such a tax (sorry – I can’t find the reference).
I really don’t understand this at all.
The argument goes that a windfall tax is needed because the energy companies are making excess profits: that is, they are profiting from unfair market practices – they either represent an oligolopoly or, locally, a monopoly.
The electricity and gas companies – privatised in the 1980s and 1990s – are regulated by the Office of Gas and Electricity markets – Ofgem. If any energy companies are abusing their market position, they should be subject to sanction by Ofgem, the Office of Fair Trading - “making markets work well for consumers” (I mean, jeez! It’s their bloody job!) or the Competition Commission.
That’s right – there are three different regulatory bodies who have the power to investigate market abuse by energy companies.
If MPs or the unions believe the energy companies are profiting from excess prices because the energy retail or wholesale markets aren’t working properly, they have lots of ways of prompting an investigation – which would result in large fines.
As it is, these companies are making large profits at the moment. (I have no idea if these are excessive or not.) As a result, they pay a large amount of money in corporation tax – this is a good thing: it pays for hospitals and schools and lots of other things we need money for in society.
This is a very different argument to saying that energy prices are high, and many people may need help to pay their bills this coming winter. This is something MPs and unions can do something about. Indeed, looking after their constituents is what they should be about. But they don’t need to bash businesses whilst they are about it.
Labour MPs, unions and even 70% of the public support such a tax (sorry – I can’t find the reference).
I really don’t understand this at all.
The argument goes that a windfall tax is needed because the energy companies are making excess profits: that is, they are profiting from unfair market practices – they either represent an oligolopoly or, locally, a monopoly.
The electricity and gas companies – privatised in the 1980s and 1990s – are regulated by the Office of Gas and Electricity markets – Ofgem. If any energy companies are abusing their market position, they should be subject to sanction by Ofgem, the Office of Fair Trading - “making markets work well for consumers” (I mean, jeez! It’s their bloody job!) or the Competition Commission.
That’s right – there are three different regulatory bodies who have the power to investigate market abuse by energy companies.
If MPs or the unions believe the energy companies are profiting from excess prices because the energy retail or wholesale markets aren’t working properly, they have lots of ways of prompting an investigation – which would result in large fines.
As it is, these companies are making large profits at the moment. (I have no idea if these are excessive or not.) As a result, they pay a large amount of money in corporation tax – this is a good thing: it pays for hospitals and schools and lots of other things we need money for in society.
This is a very different argument to saying that energy prices are high, and many people may need help to pay their bills this coming winter. This is something MPs and unions can do something about. Indeed, looking after their constituents is what they should be about. But they don’t need to bash businesses whilst they are about it.
no subject
Date: 2008-09-07 07:45 pm (UTC)For the most part, the excess profits come from the drilling/extraction/importing arms of the companies. They're obliged to sell their stuff at the international price on the commodities market, even if they're selling it to themselves.
That way other companies (like Tesco) can buy oil and then sell it to us. In normal circumstances, it keeps costs down (UK pre-tax petrol costs are amongst the lowest in Europe IIRC).
If the extraction companies are making excess profits, it's because the speculation on the energy markets is massive and/or demand has rocketed (both of which are true currently). To allow them to sell it internally (so BP fuel stations buy from BP extraction) at cheaper rates would pretty much force other fuel stations and/or home energy distributers out of business and thus hurt us medium term.
The solution is cut consumption and stop invading oil producing countries for spurious reasons. Oh, and maybe switch to trading oil in Euros like what we should've been doing 5 years ago and Iran is planning on. Propping up the dollar and the US economy in the way we are is a bit silly, really.
no subject
Date: 2008-09-10 10:05 am (UTC)I heard a clip of Gordon Brown as newly appointed Chancellor, saying the days of boom and bust were gone. How we laughed.